Kazaa, in lite or full form, is a dangerous program and probably the cause. Installing in Safe Mode means that your antivirus was not running, so it could have installed an virus that is new enough to not be detected by the Norton AV CD. It may even be effecting you BIOS, in which case you are really out on a limb.
A couple of options:
1. Make a set of updated Norton AV floppy disks on a known good computer and write protect them, then use them to boot into your system. If you are using NTFS on your hard drive, you will need to check with Symantec about how to deal with that. Do a complete scan from there and fix the problem if possible.
2. Use the XP CD to boot into the Repair section if it will do so. I believe you get there by selecting Install, but then select Repair instead of Install. See if that can fix the problem.
Next - dump Kazaa and never go near it again.....