This is XPe but it's virtually identical to XP.
After a BIOS update, it boots as far as the windows logo/progress bar screen. Then it halts at the black screen which follows this, and does not proceed to the pale blue screen.
If I insert a USB or PS2 mouse, it boots normally.
With the old BIOS, it boots normally.
I suspect one of the "burned in" BIOS options which you can't get at with the CMOS setup app. But I'm not sure how to get at these. It's a 2006 Phoenic Award BIOS.