A few days ago my Dell Latitude D830 suddenly died on me and would not turn itself back on. The IT department removed my hard disk and placed it inside a new D830. All seemed to work perfectly until I rebooted and started to get the above error. I was unable to connect to the network, certain programs wouldn't work and I wasn't even able to look at the event log to see what was wrong!
So taking out my personal laptop I Googled the error and came up with some rather interesting results. It appears that when Vista starts up, if any of the programs hang or fail it can lead to some pretty strange behaviour. The first error I received was the "People near me service has failed. A system call that should never fail has failed". It appears the culprit was the winsock service and the fastest way to solve the problem was to open a command line window as Administrator and use the following command.
Netsh winsock reset
Reboot your machine and like magic, the problem is solved.
You can find more about the problem here http://social.technet.microsoft.com/Forums/en-US/itprovistasecurity/thread/f4ce24aa-ae9d-4927-8b0f-52f3ddc4fbd9