Renaming the IOSubsys folder is suggested when the problem occurs in W/98, in which renaming (ren) iosub sys iosubold in C:\WINDOWS\SYSTEM would make Win98 replace it with a fresh copy during reinstallation. But under Windows 95 it has to do with an incorrect memory setting. MS fix is to edit the System.ini. See
http://support.microsoft.com/kb/225497Maybe someone else maybe could give you the commands to do so from DOS, and if needed, to also rename the IOSubsys folder back .
You could have tried holding down the F8 key when you booted and chose Command prompt and typed scanreg /restore to rollback the registry, which should have restored previous versions of system.ini & win.ini.
Note that your data is safe, as you can always do an "over the top" reinstall of Windows, which should keep your date safe. I always recommend a partitioning drive, in which your documents are in a different partition than your OS.