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I recently reinstlled my OS just to clear everything. Then I downloaded service pack 2. THen I installed IE 7.
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It is normally necessary to reboot after each major step. If you miss such a step (often requested by the system) you will likely end up with the kind of issues that you have reported.
Did you reformat your PC hard drive before you started? It is not very encouraging when you discover malware as soon as you did. You need to reinstall XP offline and ensure that you install an antivirus tool
before connecting to the Internet.