Win7 not starting after welcome screen - possible malware

So, here goes, help me be a hero to a 9 year old once again…

One of the Reeblings decided to download a Windows 8 skin pack on his PC without first checking the file (even after many reminders to check ANYTHING downloaded)

Now his PC (Win7 home premium 32bit) won’t let him go any further than the welcome screen. It will boot as normal, but after typing in his password the screen hangs for about 20 secs, goes black for a few seconds (with indications from the monitor that it is going in and out of power save mode) then returns to the welcome screen.

Googling tech forums is tough due to many similar boot problem threads, none of which quite address this problem.

The machine will boot up fine in Safe Mode fine (although if I try booting up into ‘Safe Mode with Networking’ the desktop appears but you can’t access anything on the desktop or menus).

Going by the sticky at the top of GQ, so far I have run ATF, Malware AB, S&D, AVG and CCleaner with no success. These were all present on the machine when it was handed down to him. As I can’t get the PC to connect to the web at the moment I can’t download the other programs listed in the sticky to try those. Furthermore the PC won’t recognise our external drive so we can’t back up his stuff.

I have also tried the repair utility on the Win7 disc to no avail and the userinit.exe seems fine when comparing it to other PCs (date and registry etc.).

It doesn’t have a recent restore point either (I know, I know)…so the big question is…Is there a soution that doesn’t entail reformatting? I’m at a loss here…