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While we haven't run into issues ourselves, there has been a spattering of complaints online about systems being borked after installing Windows 7's first Service Pack. Microsoft acknowledged the problem via a Knowledge Base article (975484), in which the Redmond software giant says your computer may freeze or restart to a black screen with error message 0xc0000034 after applying SP1.
If this happens to you, there are a couple of things to do. The first involves restoring your computer to a pre-SP1 state by using System Restore. Since your computer already isn't booting normally, this is easier said then done. The trick is to press the F8 key when booting, as if you were going to boot into Safe Mode, but choose "Repair your Computer" in the "Advanced Boot Options" area instead.
The other option is to delete the poqexec entry from the SetupExecute value, which is a bit more involved and entails mucking around the Registry. See here for detailed instructions on both workarounds.
Did you install Windows 7's Service Pack? If so, how did it go?