Have you tried resetting the IP stack AND winsock with WinsockXPfix.exe? try that next. Here is a link:
This could also be a NIC issue. Try going into device manager, delete the NIC. reboot, then reinstall the drivers. If that works then fine. If not, then try the winsockxpfix as stated above.
Releasing and renewing usually won’t change the IP address and the reservation is still setup in DHCP. In order to force an IP change (which probably won’t fix your problem at all) release the IP on the workstation, then remove the entry for the machine from the DHCP server. Then renew the IP. That “should” give you a different IP address.
Added by Jlees
You COULD try deleting the profile or creating a new LOCAL user account that has rights to log onto the system with the NIC unplugged and see if that makes it any better, but with it hanging at applying computer settings it sounds like it is having troubles applying a computer policy, potentially DNS is having issues.