I am currently running Windows XP Service Pack 3 on my system. But today, when I failed to connect to the internet, via a LAN cable, I realized that almost all of the vital network services had stopped functioning. Any attempts to start it through services.msc gives me the following message:

Could not start the DNS Client Service on Local Computer
Error 1068: The dependency service group failed to start

All my software or services that are related to networking have stopped functioning, for example, Windows Firewall is turned off permanently, so is my Avast Anti-Virus' service of Real Time Shields and Web Shield.

When I insert the LAN wire into my laptop, it registers itself, but this is what I get when I do a ping localhost

C:>ping localhost
Unable to contact IP driver, error code 2

Moveover, with ipconfig I get this :

Windows IP Configuration
An internal error occurred: The request is not supported.
Please contact Microsoft Product Support Services for further help.
Additional Information: Unable to query host name

On some further poking around, I saw that none of the "NETWORK SERVICE" process in task manager, except svchost.exe were running. Also, when I first opened the task manager, I saw some 20 processes running with username column empty for most of them.

With some search in Google, I found out that these services were important,

DHCP
DNS
Net logon
Network connection
Network location Awareness
TCP/IP Net BIOS Helper

none of them, except Network Connections are working, they do not start. The event viewer of my system shows a bunch of 7000 and 7001 event errors.

I have tried re installing the network driver, booting in safe mode with networking and tried to enable those services mentioned above. I had disabled System Restore some time back, so I have no restore points for my system. I tried a lot of things from Google searches but none of them worked. Also, with such a long list of issue, I am a little confused as to what should I search on the internet. :(

One more thing I would like to mention, previous morning, my anti-virus Avast detected a RootKit buried deep in my system folders. It was removed, but maybe this was a problem caused by the root kit. I did run a boot-time scan but no viruses were found. Please please please advice. Is formatting and re-installation of Windows my only option?