But it does boot from CD, correct? That means that at least the thing gets somewhere (which starts to rule out a hardware problem. I'm surprised you can't hit safe mode; that usually comes up very soon in the boot process. I'd try the second hard drive thing, myself. You just have to be careful that you're installing on the correct drive!
When you say when it tries to start, do you get to the Windows XP splash screen (with the little green progress bar on the bottom? If so, it's crashing after the point where safe mode would be accessed. Start hitting F8 right after you turn it on (just keep pressing it) and see if you hit the list of modes. If you can get it up in Safe Mode, then you can uninstall SP2 (and reapply it if you're brave!)
