Have you loaded SP1 for XP? What version of LiteStep? What version of the installer? Any particuar theme? It happens everytime? You are using the Welcome screen? Does a black bar appear where the Wharf bar should be? Have you tried to change the way you log into XP, Control Panel, User Accounts, Change the way users log on or off? Uncheck Welcome Screen (and possibly Fast User Switching). Have you run through your Services and tried turning off the unnecessary ones, and rebooting?

Just some thoughts...