"lsass.exe - unable to locate component....."

XP-Pro w/SP-2. System was fine, End User out on vactation for past two weeks.
Came back into office today and this is what he booted to. When system boots
the following error is displayed:

"lsass.exe - unable to locate component. Application failed to start because
SAMLIB.DLL ws not found."

You can then click on 'OK', but it'll sit there forever. Safe Mode will also
hang after selecting 'OK'.

Have tried to replace samlib.dll with EXPAND command but canNOT get this
file to expand even though Write access is present.

Any idea what is causing this?

Thanks!