  We introduce an $xy$ generalization of the frustrated Ising model on a
triangular lattice. The presence of continuous degrees of freedom stabilizes a
{\em finite-temperature} spin state with {\em power-law} discrete spin
correlations and an extensive zero-point entropy. In this phase, the unquenched
degrees of freedom can be described by a fluctuating surface with logarithmic
height correlations. Finite-size Monte Carlo simulations have been used to
characterize the exponents of the transition and the dynamics of the
low-temperature phase.
