While running System Restore, the utility stops running and all Restore Points are deleted. The System event log contains an entry with a 0xc0000040 error.
When you restart Windows XP, System Restore automatically starts and creates a new Restore Point.
A 3rd party program is modifying a file in a way that creates a conflict with the System Restore utility. If you discover which program, report this behavior to the vendor.
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