I've seen this problem occur before. I've seen this happen when
networking was set up improperly. Although, from your description,
it could be something unrelated. A description of how this started
happening or what you did to make this start happening would be beneficial
to help troubleshoot this problem.
Here is a way to stop .vxd file from loading which may be your
problem. Boot up your machine in safe mode. Go to
Start->Find->Files or Folders. Search for the "system.ini"
file and double click on it to open it up for editing. Look through
the file for a line which has a file that has a .vxd extension on
it. If it says the name of the file in the error message you are
getting, look for that file. If you find such a line place a
semicolon in the very front of the whole line. This will comment it
out and make Windows skip it. Save the file and reboot the machine
without safe mode and see if it works. If not, go back into Safe
Mode, remove the semicolon you placed in the system.ini file before and
look for another like with .vxd in it and do the same process.
One of these calls to a .vxd file may be causing this problem.
When you comment it out it will allow window to keep loading. Let me
warn you though, the system.ini file is essential for Windows to load so
be careful what changes you make.
If you are not comfortable with this, you should get or make a boot
disk for your computer that will load the drivers so you can access your
CD-ROM. Put in the windows 95 CD and run setup again to reinstall
the Windows 95 files and overwrite any corrupt files.