Thank you for the help, Todd (zonedout) recommended I come here and get help. I have been battling this for over a week.

Details of events if you care to read: I have now and had AVG anti-virus and spybot on my system when my infection happened. I had to open a yahoo mail account for another entity and upon exiting yahoo mail account my system went crazy. Spybot went crazy with hundreds of popups warning of registry changes for me to accept or deny to the extent that I could not even move. Suddenly an icon appeared on my toolbar named Malware Alarm. My desktop changed from my theme to a solid blue background and I could not change it back. My system was totally bogged down barely moving. I downloaded a couple more spyware programs, counterspy and Ad-aware 2007. Ad-aware would not scan for me. counterspy and AVG found many malwares, unidentified worm and virus Lop, and I would use the fix/remove tools but it seemed that the things kept regenerating themselves no matter what I did. Then days later I had to reboot and my computer would not reboot, it just kept loading the start up and would keep flipping back to that, never loading windows. I then reinstalled xp and finally was able to get windows to load again. I then found a forum and followed their directions doing a panda scan, then downloaded zonedout and IE-Spyad and Spyware Blaster and ran that, as recommended. Todd helped me with zonedout and then told me to come here and follow your guideline as you were the best for help. This time ad-aware, after removing the first download and program and redownloading, worked for me. It found 89 malwares, and in fixing those, I finally got my desktop theme back (hooray!). Then I ran spybot again and it found 3 browser redirects and I had spybot fix them. Then I did the hijackthis as instructed and got the log I am pasting below, as directed. I appreciate any further help if there are still problems that you note.

Added to post on 12-5-07: This morning my scheduled AVG scan has aready picked up Trojan Downloader Generic 6XDE and ??sks\wauboot.exe Trojan horse Generic5.KA

Logfile of Trend Micro HijackThis v2.0.2
Scan saved at 11:33:51 PM, on 12/4/2007
Platform: Windows XP SP1 (WinNT 5.01.2600)
MSIE: Internet Explorer v6.00 SP1 (6.00.2800.1106)
Boot mode: Normal

Running processes:
C:\WINDOWS\System32\smss.exe
C:\WINDOWS\system32\winlogon.exe
C:\WINDOWS\system32\services.exe
C:\WINDOWS\system32\lsass.exe
C:\WINDOWS\system32\svchost.exe
C:\WINDOWS\system32\svchost.exe
C:\WINDOWS\System32\svchost.exe
C:\WINDOWS\system32\spoolsv.exe
C:\PROGRA~1\Grisoft\AVG7\avgamsvr.exe
C:\PROGRA~1\Grisoft\AVG7\avgupsvc.exe
C:\PROGRA~1\Grisoft\AVG7\avgemc.exe
C:\WINDOWS\System32\svchost.exe
C:\Program Files\AOL\Active Security Monitor\ASMonitor.exe
C:\WINDOWS\System32\devldr32.exe
C:\Program Files\QuickTime\qttask.exe
C:\Program Files\HP\hpcoretech\hpcmpmgr.exe
C:\Program Files\Hewlett-Packard\HP Software Update\HPWuSchd.exe
C:\WINDOWS\System32\hphmon05.exe
C:\PROGRA~1\ALLTEL~1\SMARTB~1\MotiveSB.exe
C:\PROGRA~1\Grisoft\AVG7\avgcc.exe
C:\WINDOWS\System32\HPZipm12.exe
C:\Program Files\Messenger\msmsgs.exe
C:\Program Files\Spybot - Search & Destroy\TeaTimer.exe
C:\Program Files\Internet Explorer\iexplore.exe
C:\WINDOWS\explorer.exe
C:\Program Files\Lavasoft\Ad-Aware 2007\aawservice.exe
C:\Program Files\hijackthis\HijackThis.exe

R0 - HKCU\Software\Microsoft\Internet Explorer\Main,Start Page = www.windstream.net
R1 - HKCU\Software\Microsoft\Windows\CurrentVersion\Internet Settings,ProxyOverride = 127.0.0.1
O3 - Toolbar: &Radio - {8E718888-423F-11D2-876E-00A0C9082467} - C:\WINDOWS\System32\msdxm.ocx
O4 - HKLM\..\Run: [ASM] "C:\Program Files\AOL\Active Security Monitor\ASMonitor.exe" HIDEMAIN
O4 - HKLM\..\Run: [QuickTime Task] "C:\Program Files\QuickTime\qttask.exe" -atboottime
O4 - HKLM\..\Run: [HPHUPD05] C:\Program Files\Hewlett-Packard\{45B6180B-DCAB-4093-8EE8-6164457517F0}\hphupd05.exe
O4 - HKLM\..\Run: [HP Component Manager] "C:\Program Files\HP\hpcoretech\hpcmpmgr.exe"
O4 - HKLM\..\Run: [HP Software Update] "C:\Program Files\Hewlett-Packard\HP Software Update\HPWuSchd.exe"
O4 - HKLM\..\Run: [HPHmon05] C:\WINDOWS\System32\hphmon05.exe
O4 - HKLM\..\Run: [HPDJ Taskbar Utility] C:\WINDOWS\System32\spool\drivers\w32x86\3\hpztsb09.exe
O4 - HKLM\..\Run: [Motive SmartBridge] C:\PROGRA~1\ALLTEL~1\SMARTB~1\MotiveSB.exe
O4 - HKLM\..\Run: [AVG7_CC] C:\PROGRA~1\Grisoft\AVG7\avgcc.exe /STARTUP
O4 - HKLM\..\Run: [SBCSTray] C:\Program Files\Sunbelt Software\CounterSpy\SBCSTray.exe
O4 - HKCU\..\Run: [MSMSGS] "C:\Program Files\Messenger\msmsgs.exe" /background
O4 - HKCU\..\Run: [I&F Viewer toolbar] "C:\Program Files\Photo Toolkit\ivbar\phototoolkitmem.exe" -start
O4 - HKCU\..\Run: [SpybotSD TeaTimer] C:\Program Files\Spybot - Search & Destroy\TeaTimer.exe
O4 - HKCU\..\Run: [Audio Studio V2.8] C:\WINDOWS\flsmontr.exe
O4 - HKCU\..\Run: [IntelliMouse Explorer V2.3] C:\WINDOWS\netpefr32.exe
O4 - HKUS\S-1-5-19\..\Run: [AVG7_Run] C:\PROGRA~1\Grisoft\AVG7\avgw.exe /RUNONCE (User 'LOCAL SERVICE')
O4 - HKUS\S-1-5-20\..\Run: [AVG7_Run] C:\PROGRA~1\Grisoft\AVG7\avgw.exe /RUNONCE (User 'NETWORK SERVICE')
O4 - HKUS\S-1-5-18\..\Run: [AVG7_Run] C:\PROGRA~1\Grisoft\AVG7\avgw.exe /RUNONCE (User 'SYSTEM')
O4 - HKUS\.DEFAULT\..\Run: [AVG7_Run] C:\PROGRA~1\Grisoft\AVG7\avgw.exe /RUNONCE (User 'Default user')
O4 - Startup: Cool - Auto Update.lnk = C:\Program Files\Cool\cool.exe
O4 - Global Startup: Adobe Gamma Loader.lnk = C:\Program Files\Common Files\Adobe\Calibration\Adobe Gamma Loader.exe
O4 - Global Startup: Creating Keepsakes Scrapbook Designer Event Reminder.lnk = C:\Program Files\Scrapbook Designer\scrapremind.exe
O4 - Global Startup: Microsoft Office.lnk = C:\Program Files\Microsoft Office\Office10\OSA.EXE
O4 - Global Startup: Scanner Detector.lnk = C:\Program Files\ScanSuite\SDetect.exe
O4 - Global Startup: Windstream Broadband Check-up Center.lnk = C:\Program Files\ALLTEL DSL Check-up Center\bin\matcli.exe
O8 - Extra context menu item: E&xport to Microsoft Excel - res://C:\PROGRA~1\MICROS~2\Office10\EXCEL.EXE/3000
O9 - Extra button: Related - {c95fe080-8f5d-11d2-a20b-00aa003c157a} - C:\WINDOWS\web\related.htm
O9 - Extra 'Tools' menuitem: Show &Related Links - {c95fe080-8f5d-11d2-a20b-00aa003c157a} - C:\WINDOWS\web\related.htm
O9 - Extra button: Messenger - {FB5F1910-F110-11d2-BB9E-00C04F795683} - C:\Program Files\Messenger\msmsgs.exe
O9 - Extra 'Tools' menuitem: Windows Messenger - {FB5F1910-F110-11d2-BB9E-00C04F795683} - C:\Program Files\Messenger\msmsgs.exe
O16 - DPF: {215B8138-A3CF-44C5-803F-8226143CFC0A} (Trend Micro ActiveX Scan Agent 6.6) - http://prerelease.trendmicro-europe.com/ho...ivex/hcImpl.cab
O16 - DPF: {321FB770-1FBE-4BFE-BDC1-6F622D4FA499} - https://activation.alltel.com/wizlet/WINDST...aller_2-0-0.cab
O16 - DPF: {9A9307A0-7DA4-4DAF-B042-5009F29E09E1} (ActiveScan Installer Class) - http://acs.pandasoftware.com/activescan/as5free/asinst.cab
O16 - DPF: {D27CDB6E-AE6D-11CF-96B8-444553540000} (Shockwave Flash Object) - https://fpdownload.macromedia.com/pub/shock...ash/swflash.cab
O16 - DPF: {EFD3EA56-234D-4240-90EA-CC9FA3AF5A01} (ConnectivityTester Class) - https://care.alltel.com/lwp/static/installe...TELControls.cab
O20 - AppInit_DLLs: c:\windows\system32\ldcore.dll
O23 - Service: Ad-Aware 2007 Service (aawservice) - Lavasoft AB - C:\Program Files\Lavasoft\Ad-Aware 2007\aawservice.exe
O23 - Service: Adobe LM Service - Unknown owner - C:\Program Files\Common Files\Adobe Systems Shared\Service\Adobelmsvc.exe
O23 - Service: AVG7 Alert Manager Server (Avg7Alrt) - GRISOFT, s.r.o. - C:\PROGRA~1\Grisoft\AVG7\avgamsvr.exe
O23 - Service: AVG7 Update Service (Avg7UpdSvc) - GRISOFT, s.r.o. - C:\PROGRA~1\Grisoft\AVG7\avgupsvc.exe
O23 - Service: AVG E-mail Scanner (AVGEMS) - GRISOFT, s.r.o. - C:\PROGRA~1\Grisoft\AVG7\avgemc.exe
O23 - Service: Google Updater Service (gusvc) - Google - C:\Program Files\Google\Common\Google Updater\GoogleUpdaterService.exe
O23 - Service: Pml Driver HPZ12 - HP - C:\WINDOWS\System32\HPZipm12.exe
O23 - Service: Sunbelt CounterSpy Antispyware (SBCSSvc) - Sunbelt Software - C:\Program Files\Sunbelt Software\CounterSpy\SBCSSvc.exe

--
End of file - 6254 bytes

First:
SpywareQuake/SpyFalcon/Smitfraud* Removal

Note: These instructions are only for Windows 2000, XP Home, XP Pro, & 2003.

The following steps may not clean all of it, but should be a good start and will restore the desktop to default at least so you can proceed with complete removal using various tools.

1. Print out or save to notepad these instructions as we will need to do most steps offline and in SAFE MODE (so you won't have this window open to see the instruction from)

2. Download SmitfraudFix (by S!Ri) to your Desktop.
http://siri.urz.free.fr/Fix/SmitfraudFix.zip
Extract all the files to your Destop. A folder named SmitfraudFix will be created on your Desktop.

3. Reboot into Safe Mode***

4. Open the SmitfraudFix Folder, then double-click smitfraudfix.cmd file to start the tool.
Select option #2 - Clean by typing 2 and press Enter.
Wait for the tool to complete and disk cleanup to finish.
You will be prompted : "Registry cleaning - Do you want to clean the registry ?" answer Yes by typing Y and hit Enter.
The tool will also check if wininet.dll is infected. If a clean version is found, you will be prompted to replace wininet.dll. Answer Yes to the question "Replace infected file ?" by typing Y and hit Enter.

A reboot may be needed to finish the cleaning process, if you computer does not restart automatically please do it yourself manually.

5. Now please scan with HijackThis to produce a log. We will also need the log from Smitrem: The tool will create a log named rapport/txte in the root of your drive, eg; Local Disk C: or partition where your operating system is installed. Please post that log along with all others requested in your new topic.

Logs needed in your post are:
rapport.txt in the root of your drive, eg: Local Disk C: or partition where your operating system is installed


*** How to Boot into Safe mode: http://www.computerhope.com/issues/chsafe.htm


Second:
Reboot in Safe Mode* and run HiJackThis. <-- IMPORTANT

Press the 'Scan' button and when done check the following items in HijackThis:
O4 - HKCU\..\Run: [Audio Studio V2.8] C:\WINDOWS\flsmontr.exe
O4 - HKCU\..\Run: [IntelliMouse Explorer V2.3] C:\WINDOWS\netpefr32.exe

O20 - AppInit_DLLs: c:\windows\system32\ldcore.dll


Close all windows except HijackThis and click Fix checked.


While still in Safe Mode*, delete the following: (you may need to show hidden files**)
(Files specified without a full path will be located in C:\Windows\ or C:\Windows\System32\)
C:\WINDOWS\flsmontr.exe
C:\WINDOWS\netpefr32.exe



*How to Boot into Safe mode:
http://www.computerhope.com/issues/chsafe.htm

**Show Hidden and System files and folders: http://www.xtra.co.nz/help/0,,4155-1916458,00.html

Also, uncheck the boxes for hiding known file extensions and hiding protected operating system files. We want to see it all. When we finish here, it would be a good idea to rehide the protected operating system files but leave the rest to be shown.

Reboot in normal mode

Run HiJackThis again and post a new log in this thread. (Be sure that Word Wrap is turned off in Notepad)

I appreciate the thorough explanations on what to do, because I can be computer illiterate, like now probably. I downloaded the file and I also created the instructions in notebook and put them on the desktop and moved on to do the rest. I rebooted into safe mode, but everything is missing in safemode, the instructions to follow and the Smitfraud file. ???

Find where you put the SMitFraud folder. Once in SAfe Mode, navigate there to use it. Best place is to put it on your Desktop. Safe Mode uses a smaller desktop, but everything should be visible. To be sure, put the folder in the center of the desktop.