Your problem with getting "Access denied" with Recovery Console is by design; there are built-in restrictions for what you normally can do in RC. But read this article by Fred Langa on how to get around that:
Langa Letter: The OS Inside The OS - Technology News by InformationWeek
On the second page there is info on a registry edit you can use to enable the SET command in RC, which will then allow you to use the SET AllowAllPaths = True that removes the normal RC restrictions. Now, how are you going to be able to use REGEDIT on a non-booting system? One of two ways: a) mount the nonbooting hard drive as a secondary in a working XP system (as you have already tried) and then use what is called "offline registry editing" to access the registry of the bad drive. or b) use a bootable "mini-WinXP" CD like BartPE, with a plugin called RegeditPE, so that you could do the same.