the recovery console works a little differently than a standard command prompt in XP, with limited commands, and it may also may make what access you have to the HD read-only. I don't remember that for sure, but it wouldn't surprise me. here's MS's page for the recovery console with descriptions of all the commands available to you:
Description of the Windows XP Recovery Console for advanced users
Have you tried either the "fixboot" or "fixmbr" commands? the installation is obviously there, (hence the presence of the recovery console), so it seems to be reading the partition correctly, just not booting windows properly. unfortunately, every recovery disk I've ever used (pretty much all brands) has only given the options for preset "fixes" which rarely work, or only work in specific circumstances, or total recovery. so if you can't repair the problem in the recovery console, or get the HD hooked up to another computer, you may be forced to lose it all.
is the problem computer a desktop or laptop? if it's a desktop, you can very easily remove the hard drive and install it into a new machine. the only thing you really have to be careful about anymore is that both use the same type of connectors, which will be obvious if you have them open. if it's a laptop, it can be harder to get the HD out at all (some Sonys and older Toshibas put the HD under the keyboard), but, and I'm not necessarily advocating this, as a former Circuit City technician, I've seen several customers buy a HD enclosure, and then return it within a week because it "didn't suit their needs." I'm sure it was for a similar situation. They used it and were done with it. On the other hand, they're only about $30 and are helpful to have around.
anyway, a little long-winded but I hope it helps.