That file is the kernel and therefore right at the heart of your XP system. If it's missing, nothing will happen in there. Use youur XP CD to run the Repair option and fix the problem for you.
A lot of times this error comes up due to a bad hard drive. Run a disk check on the drive, there may be a utility in the BIOS to test the hard drive, if not, there are some boot disks you can get to run a drive test. This Hitachi one may work on several brands, try it and see http/www.hgst.com/support/downloads#DFT
You can also make a Hiren's Boot CD and run HD Tune from it. http/www.hiren.info/pages/bootcd It also includes a bunch of other free tools to check drive issues.