THE solution to this problem.
I'll admit that I was one of those users who thought all those warnings out there for custom boot screens not working in SP1 were just isolated incidents. Then I installed SP1, and tried a custom boot screen, and got a real scare when my system went into that eternal login loop. But I found out how to fix it, and wanted to post the solution for anyone else who makes the same mistake.
When you have this looping problem, you can't even boot into safemode. So what I had to do is boot with my xp cd, and go into the recovery console. You need the administrator password for this.
The console doesn't allow you to edit the boot.ini file, but it allows you to view it, so you can see which ntoskrnl file your boot.ini is pointing to.
From the recovery console, copy the unmodified ntoskrnl from the c:\windows\servicepackfiles\i386 directory to replace the one your boot.ini file is pointing to, and then restart the computer. This should fix the problem, and then if needed, you can edit the boot.ini file and shuffle the good files around to wherever they need to be.
Hope this helps y'all.