Shari,
The inability to install tools isn't a bug, it works fine for most people. Something else is wrong. From your description, I wouldn't suspect a registry problem anyway. Something else is going on.
I don't have any Windows book recommendations because I don't need Win books; I use the Microsoft documentation Which I pay them lots of money for (unfortunately).
So here are some sugestions:
Try booting from your XP disk and repairing your installation. If that doesn't work, create a new VM, install XP, and immediately install the tools. If that does work, update from the WindowsUpdate site, then activate with MS to prove you aren't a criminal (dontcha love it?). If it won't activate automatically, call them and tell them you are reinstalling it on the same machne because the first installation became corrupted.
Once you have done this, take one more critically important step, and make a copy of your .hdd file. This will give you a copy of a fresh activated XP install with tools that you can use as a base to step back to if necessary.
Then install your programs, verify that they are working, and back up your .hdd file again.
At this point, I'd suggest you create another virtual disk, attach it to your machine, and use it for data. Then if you have any more problems, you can revert to a backup copy of either your system or data disk as required.
Then my advice would be to make a backup of anything (either disk) you've changed as soon as you've done enough work that you don't want to do it again. This could be after a few hours or a few months depending on what you are changing.
It would be good to make those backups somplace other than your Mac hard disk. The idea is that no matter what fails, you still have a good copy somewhere. A pair of external USB or Firewire drives that you back up to alternately would be a good choice unless you can fit everything on a DVD. In any case, backups are a good thing(tm).
Remember, there are only two kinds of disks, those that have failed, and those that will.
Good luck,
Joe