crash - Windows XP only loads in VGA mode, and crashes when raising resolution

My kid's computer (Windows XP, SP3) started to (what appears to be) crash on boot.
It will only boot in Safe or VGA mode, and if I try to raise the resolution from 640x480 it just reboots itself, and a error appears in the Event Log.
When it loads up not in VGA mode, the monitor shuts off just after the windows logo is shown. It seems like windows is actually running but I can't see anything on screen (monitor is off for lack of signal).

Nothing was installed recently that I know of, short of the usual windows updates.

Thanks,
Harel

Below is the event log error:

Event Type: Error
Event Source:   System Error
Event Category: (102)
Event ID:   1003

Date:       15/04/2012
Time:       16:27:11
User:       N/A
Computer:   -----
Description:
Error code 1000008e, parameter1 c0000005, parameter2 f745b0bf, parameter3 ede24f98, parameter4 00000000.

For more information, see Help and Support Center at http://go.microsoft.com/fwlink/events.asp.
Data:
0000: 53 79 73 74 65 6d 20 45   System E

0008: 72 72 6f 72 20 20 45 72   rror  Er
0010: 72 6f 72 20 63 6f 64 65   ror code
0018: 20 31 30 30 30 30 30 38    1000008
0020: 65 20 20 50 61 72 61 6d   e  Param
0028: 65 74 65 72 73 20 63 30   eters c0
0030: 30 30 30 30 30 35 2c 20   000005, 
0038: 66 37 34 35 62 30 62 66   f745b0bf
0040: 2c 20 65 64 65 32 34 66   , ede24f
0048: 39 38 2c 20 30 30 30 30   98, 0000
0050: 30 30 30 30               0000