The first problem that I noticed was that Internet Explorer was crashing very frequently. Then I received a bogus Windows Security alert that said something to the effect that spyware was detected and did I want to go a site to get the spyware removal software. A notepad session opened and text started being typed that said "I'm keeping an eye on you..." Then I found that if I clicked on any shortcut or tray icon Windows (XP Home SP2) would raise the dialog asking which application I wanted to use to open the file.
Some error messages also appeared one mentioned the file iomtrer.dll.
I opened the task manager and saw that several trashicon.exe processes were running. I killed them all and was able to delete trashicon.exe and iomter.dll. I still couldn't launch applications. So I did a search for "can't run exe file" and found this:
http://windowsxp.mvps.org/exefile.htm
After running the file I downloaded form there everything seems to be okay. However I want to be sure I've gotten rid of everything. Here are the logs. Thanks for your help.