Rescue & Recovery Stop Error

[dwilt]

I have an X40 notebook, and recently both USB ports stopped working, even though I've tried a number of different USB devices. Device Manager indicates that the USB ports are functioning properly.

I've decided to reformat the hard drive and restore it back to original factory settings, in the hopes that it's a software-related issue. The problem is, when I attempt to run Rescue & Restore by hitting the Access IBM button, I get a blue screen with the following error:
“Stop: c000021a {fatal system error} The
session manager initialization system process terminated unexpectedly with a status of. ...”

I downloaded and installed an updated version of Rescue & Recovery and attempted to run it, but it continually gets hung up.

I can't do a fresh install from CD since I am unable to use the USB port for the external CD-R drive. Does anyone have any other ideas?