While many have had a different cause, the fix for me was to change the Memory usage from "cache" to "programs." System Properties-Advanced-Performance settings-Advanced-Memory usage.
I got the Lsass.exe system error this morning, "The endpoint format is invalid." After disabling all startup programs and services in safe mode didn't work, I took the suggestion here that the cache was to blame and changed my custome pagefiles to system managed, didn't work. Removed them completely(helps to have 1GB RAM) and changed the memory usage from "System cache" to "Programs." Joy, successful boot.
At this point I got a notification that the system had just been updated. MS broke my machine, again. Re-enabled the 768MB pagefile on the 1GB partition I had for it, still booted fine, twice. Added a system manged pagefile to the second drive and changed the memory usage back, lsass.exe error was back. Removed the page file again, no help. Switched them memory usage again back to "Programs" and it began normal booting again. Added pagefiles, still good.
The hardware has not changed in over a year, and the only software recently installed was a game and a Zone Alarm update two weeks ago. It is possible that spyware was involved, but it wasn't anything like Spyware Stormer. It would have had to be something that happened with little or no user intervention. I also pulled the drive and scanned the disk for errors and defragmented it with a Vista PC, nothing found, no help. CCleaner found a bunch of invalid registry entries, but nothing relevant, mostly MUI. Spybot and Adaware found zilch, so I am doubting malware, but I'll be running an AVG scan tonight. Just need to finish our taxes right now. Teach me not to procrastinate next year. If only we had the "FAIR TAX" instead.
Moral of this story is that Windows changes too much. Whether it is Spyware or Microsoft themselves, these changes are too difficult for the different hardware and software vendors to keep up with. We need a more stable, non-changing codebase. To update or not to update, which is worse? Usually malware, but when the system won't boot, what do you tell people? Take your shots?