Unfortunately once you’ve got something on your system these days the only reliable way to disinfect it is to backup your data (that’s usually safe - be careful to scan it with an antivirus before you restore it however) and to format and reinstall Windows. Spyware and viruses - and there’s not much to distinguish between them - root deep into your system, often attaching themselves into system files where they can’t be safely removed. Furthermore, one infection often invites many others into your system. It’s rare to have only one problem.

Incidentally, if you continue to download music and movies from filesharing sources, you’re almost certain to reinfect your machine. Spyware and virus authors use filesharing sites as a way to spread their infections.

Warren’s notes:

First thing to do is scan everything for disinfection. Programs like Ad-Aware can nail down viruses, trojans, etc and other malware and isolate it so that it won’t harm your system. In theory if Ad-Aware takes care of the malicious software in your system, then you should be able to continue using your current install of Windows XP. You should also be able to scan the files if they are on a different volume and determine if they are safe to re-input on your main hard drive using ad-aware (which will quarantine nasty files regardless). But the only way to really be sure is to completely wipe your hard drive and start fresh, and redownload the music and movies you really want from trusted sources. You can boot off the Windows XP install CD and format your drive before re-installing XP in order to make sure your drive is free and clear of malware.