Do NOT reformat or reinstall!
This is easily corrected.
That one KB you mention has the fix you need: edit the mounteddevices key.
You just need to be able to get into the registry. The easiest way would be regedit from another box on the network. If that is not an option then load a repair copy of your registry long enough to boot, fix the original, then swap it back into place.
This KB article does not apply to your problem but it contains very detailed steps on how to drop in a repair or restore point copy of your registry...
307545 How to recover from a corrupted registry that prevents Windows XP from starting
http://support.microsoft.com/default.aspx?scid=kb;EN-US;307545
Be SURE as you perform the steps you are renaming the hives in system32\config. If you overwrite them you won't have anything to fix once you get booting.
Also, don't bother trying to boot until you first undo whatever hardware change you made. Otherwise the same thing will just happen to the repair registry.
Once you are booting you can fix your original using regedit. You'll want to use the "load hive" feature of regedit to load your system and/or software hives from system32\config (the ones you renamed).
In addition to performing the edits on the mounteddevices key in your system hive I would also suggest clearing the path out from Userinit found in:
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows NT\CurrentVersion\Winlogon
Just clear the path out of the stored value so it only says userinit.exe That way if you goof up mounted devices you still have a good shot at booting to make another attempt without redoing all these shenanigans again.