When I boot up my computer I get this error

Windows could not start because the following file is missing or corrupt:
\Windows\System32\Config\System

You can attempt to repair this file by starting windows setup using the original setup cd-rom. Select 'r' at the first screen to repair.

When I boot from the WinXP SP1 setup disk and try the repair feature as suggested by the error message I'm presented with another problem:

Setup did not find any hard disk drives installed in your computer

That is all I get, I cannot get to anywhere else.

What am I to do?

How can I recover all of my data?

You probably have SATA drives, you need to press F6 to use a sata driver so that it can find your hard disk from drivers on a floppy.