|I've just run through a similar issue, though, I could boot into "normal" mode, but "safe" mode would blue screen with a 0x0000007b error.|
I suspected a boot sector virus, though, AVG, Stinger, Housecall, and NAV all came up with nothing, and Windows Defender Final, Ad-Aware SE Personal, Spybot Search & Destroy, SpywareBlaster, SpywareGuard, and others that I've ins6talled and uninstalled as necessary, have found NOTHING after some extended cleaning related mostly to Bagle-type infections.
Which brings me to my point. The machine is a Dell, and during boot, on the initial screen, there are two choices which appear in the upper right-hand corner of the screen:
1. press F2 to Go To Setup (BIOS access)
2. press F12 to go to Boot Menu (can choose to boot from Disk [cd or DVD], or choose Safe Mode (in any of its flavors)
So, either tapping F8, editing the BOOT.INI in msconfig or a text editor, or selecting the 2nd option (F12) can all get you into Safe Mode on this Dell DIM2400.
BTW, stevezal's 1-9 step process is dead-on.