Unable to logon to create a user account.

In Windows XP Home Edition, I am unable to logon to
create a new user account. When clicking on a newly
created account icon at the main logon screen, it
says, "loading personal settings". A timed message
appears with the title, "User Environment" with the info
below, then I am returned to the main screen. My network
is working fine as far as I can tell.

My Event viewer (Local), Application, also shows the same
information as when trying to log on:

Windows cannot log you on because your profile cannot be
loaded. Check that you are connected to the network, or
that your network is functioning correctly. If this
problem persists, contact your network administrator.

DETAIL - The system cannot find the file specified.

Thanks.