>OK, when the CPU is pegged, what process in Task Manager | Processes is hogging it all? The disk thrashing may be a side affect...

The "system" process is using the most when the cpu pegs out.

The processes are identical to the ones listed previously. There are no programs being ran on the server locally. All it is doing is serving up files.
Processes Again: system idle, system, smss.exe, csrss.exe, winlogon.exe, services.exe, lsass.exe, spoolss.exe, taskmgr.exe, flssrv.exe ntservic.exe, nddeagnt.exe, explorer.exe, loadwc.exe, hpjetdsc.exe, rplsvc.exe, locator.exe, rpcss.exe, atsvc.exe, tapisrv.exe, rasman.exe, tcpsvcs.exe, pstores.exe

With these processes running the cpu stays at around 5-10%

NTBOOTDD.sys is not in the root, or anywhere else on my system drive

The Boot.ini file:
[boot loader]
timeout=15
default=multi(0)disk(0)rdisk(0)partition(2)\WINNT40
[operating systems]
multi(0)disk(0)rdisk(0)partition(2)\WINNT40="Windows NT Server Version 4.00"
multi(0)disk(0)rdisk(0)partition(2)\WINNT40="Windows NT Server Version 4.00 [VGA mode]" /basevideo /sos
multi(0)disk(0)rdisk(0)partition(2)\WINNT40="Windows NT Server Version 4.00" /NoSerialMice:COM1
multi(0)disk(0)rdisk(0)partition(2)\WINNT40="Windows NT Server Version 4.00 [VGA mode]" /basevideo /sos /NoSerialMice:COM1