Hmm...so it might be a conflict with the welcome screen if it doesn't happen when you use the normal login. Personally I dislike the welcome screen, and it causes problems on my computers too, so I just stick with the regular login.

Derby, the blue screen I mean is not a stop error. It's a special windows screen that you might see when installing Windows XP or where Overlord described it.

If the diagnostic startup works, now you'll have to use trial and error to find out what the culprit is. The first thing I would do is go into the Startup and the Services tabs (in msconfig), and disable anything you don't want. Many programs install things in one of these two places, and a lot if it is just unneeded stuff.