AN EASY SOLUTION THAT LUCKILY WORKED FOR ME
I experienced this problem yesterday when installing Spybot S&D 1.6 on a friend's computer that appeared to have a browser hijack (Google results all redirected to a shopping page). The scan came back with multiple infections including Virtumonde, Zlob Downloader, Windows security bypass to name a few. Zango was also there. 622 issues altogether. When I click "fix selected problems", I received the message saying "may Spybot run again after rebooting?" I agreed and on rebooting had the fatal "command.com parameter incorrect" message as well a similar issue with cmd.exe.
My observations were:
1) Could boot OK in Safe mode
2) Initially impacted only Adminstrator accounts, may have changed after several reboots to affect all accounts
3) When booting in non-safe mode, initial welcome screen came up OK, you could select the account, and wallpaper was shown. Then the problems started.
While I was backing up the Documents and Settings folder, anticipating a possible Windows re-install, I came across this page (using another PC):
http://forums.techguy.org/windows-nt-2000-xp/682731-parameter-incorrect.html
The solution I looked the like of best (i.e. easy to try) was from Ricky6970, namely "hit Escape a gazillion times". Well, I tried that and after about 30 hits, amazingly, the Spybot window that you see after rebooting came up. I allowed the scan to complete and then chose the option to reverse recent changes. One of the entries that was restored was Zango. After that, the computer booted perfectly time after time.
The end situation is that the friend's computer is probably still packed with spyware and worse, but at least she can use it while we plan a likely Windows re-install in an orderly fashion. It is a small business accounts computer so thank God (and Ricky6970)!
I have been using Spybot for many years, and this was the first time I ever experienced anything like this. Hope the post helps.