I've got this same problem. It seems like the MS XML Parser install is corrupted, be it a file or registry. I too noticed it after SP1, but I also had the problem with Windows Update where in IE Options, Languages, no language was selected. I'm betting the two are related. So now I'm suspecting some update either directly from SP1 or post SP1, has caused this. (ie .NET Framework Sp2)
Anybody else have ideas/solutions without reimaging?