I use winternals at work for this sort of thing but for your friends case installing a recovery console should be sufficient.
Recovery Console
Follow the troubleshooting directions on that page.
You can format if you want to but don't do it via 98 or me floppy disk. Start up from xp cd, delete the partition and then do a low level format. You will lose all data on partition.
Even if he does get the virus out it seems like the damage is done and it would be a big task to repair any damage done to the filesystem, registry, and system files.
Good luck
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