I think I found what may have caused the issue, but I don’t have over 700 drives attached…
If your system has a large number of logical unit numbers (LUNs) and volumes (over 700), when you restart Windows 2000 Server or Windows Server 2003, you may receive one of the following error messages:
Windows 2000 could not start because of an error in the software. Please report this problem as Loader Error 3.
You can attempt to repair this file by starting Windows 2000 Server or Windows Server 2003 Setup using the original Setup floppy disk or CD-ROM. Select ‘r’ at the first screen to start repair.
Windows 2000 server and Windows Server 2003 store information about LUNs and volumes that have been installed and configured in a computer in the SYSTEM hive of the registry. When a device (including a drive) is removed from a system, Windows 2000 Server and Windows Server 2003 retain the registry entries in case the device returns to the system; this is part of Plug and Play. This issue can occur after an array or set of drives is reconfigured, if they are detected as new devices and therefore create duplicate entries. If there are a large number of drives (over 700), this issue can cause the SYSTEM hive to grow large.
The SYSTEM hive is limited to approximately 10.3 megabytes (MB) in size in Windows 2000 Server. This is because the SYSTEM hive and the Windows kernel files must fit below 16 MB when Windows starts.
Unfortunately, in this article (277222), they don’t tell you what to do after you press “r” in the recovery console…