Mouse Cursor Only

I have a laptop in that is doing something that I haven't seen before. You see the Windows Loading screen and then the screen blanks and a short while later the mouse cursor appears and that's all you have. In safe mode it shows the safe mode message in the 4 corners, but only shows the mouse cursor.

I removed the hard drive and scanned it on another system with F-Prot and Spy Sweeper 4. They both found and removed some crap.

I booted the system fine to a Suse Linux 9.2 Live DVD

Any thoughts on what is wrong with this? I'm thinking maybe some kind of infection but I'd like to avoid a format if possible.

You run system file checker yet?