100% CPU (random), hard drive grinding,

Akahan:  Sorry for the delay, but I wanted to run this computer for a day to make sure the solution stayed working.  I believed you nailed it - you are a genius!  Something had set this drive to PIO mode, and Device Manager would not allow me to set it back to DMA mode.  Your comment allowed me to investigate further, and here is the link I ran across that ulimately fixed it since Device Manager could not change the drive back to DMA: http://users.bigpond.net.au/ninjaduck/itserviceduck/udma_fix/
In case the link goes dead, here is the solution:  
Go to..
[HKEY_LOCAL_MACHINE\HARDWARE\DEVICEMAP\Scsi\Scsi Port 0]
[HKEY_LOCAL_MACHINE\HARDWARE\DEVICEMAP\Scsi\Scsi Port 1]
Notes:  These keys are called SCSI solely for historic reasons; SCSI Port 0 is actually IDE1 and SCSI Port 1 is IDE2.

Modify..
DMAEnabled = 1 (DWORD value)
Notes:  This is usually set to zero after a PIO failback.  Some systems may change your 1 to a 3 after a reboot - it seems to depend on how heavy your computer is already with DMA-enabled hardware.  One of my machines drives default to DMA3 and doesnt seem to act any differently, but I cant find a reference to this behaviour anywhere online.. shrug..  The machine in question is bristling with lots of tacked on hardware: 2 HDDs, CD, DVD, 3D video with TV-Out, wireless keyb/mouse, onboard sound, network, 4 USB devices.

Go to..
[HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Class\{4D36E96A-E325-11CE-BFC1-08002BE10318}\0001]
[HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Class\{4D36E96A-E325-11CE-BFC1-08002BE10318}\0002]
Notes:  0001 is the key for IDE2 and 0002 is the key for IDE1, go figure.  The string associated to MatchingDeviceId will tell you for sure what youre looking at (ie: primary_ide_channel or secondary_ide_channel.  If you dont know what those basic nuts & bolts terms are, I really really really think you should stop what youre doing RIGHT NOW.)  Also, you dont need to remember that entire long-winded numbered key, 4D36-etc& I just scan the fourth octet of the first dozen Class keys for 6A  (as underlined in the blue text above).

Delete..
MasterIdDataCheckSum
SlaveIdDataCheckSum
Notes:  If you dont see a checksums associated with a particular slot, then theres no device detected.  If you cant work out which slot goes with which drive, well, that gives me misgivings about you messing about in RegEdit, but it doesnt matter if you simply delete all the checksums in the 0001 and 0002 keys (there can be a max of two devices for IDE1, two for IDE2).  At the next login, WinXP will notice something is up when the detected devices dont match the checksum flags and the devices capabilities will be re-examined.

Delete..
MasterDeviceDetectionTimeout
SlaveDeviceDetectionTimeout
Notes:  Delete these keys if present, if you have a device that is not detecting or doesnt already have a checksum associated with it.  If theres a timeout=1 flag, Windoze doesnt bother detecting for a device in that slot at login.  Again, this is just a detection flag, so it doesnt matter if you delete them willy-nilly; if there truly is no device there, the timeout key will simply be recreated at next login.  If you still have access to a hard drive that has a timeout flag like this, chances are its running in the crippled Dos Compatibility Mode where XP is basically fudging your connection to it in real time.  I think you are told this under Device Manager > Disk Drives > (appropriate device) > General Properties tab, and also with a warning message at login.  If it is a newly installed device, you may have also forgotten to assign a partition and/or drive letter to it using the Microsoft Management Console: Start > right-click My Computer > Manage > Storage folder > Disk Management console.  Not recommended for n00bs! Very dangerous!

Create..
ResetErrorCountersOnSuccess = 1 (DWORD value)
Notes:  If this flag is present, the running tally of device access failures is reset to zero after every successful access.  (I mentioned earlier that a transfer mode downgrade is triggered after a sixth cummulative failure.)  Hopefully, this will lengthen the time before your next PIO failback as youll need six consecutive failures to trigger it.

Reboot..
Notes: After youve rebooted, go back into the IDE settings and see if DMA is available now.