2.) Go to IE > Tools > Windows Update > Product Updates, and install ALL High-Priority Security Updates listed.
If you're running Windows XP, that of course includes the Service Pack 2! If you suspect your computer is infected with Malware of any type, we advise you to not install SP2 if you don't already have it. You can post a HijackThis log on our Forums to get free Expert help cleaning your machine. Once you are sure you have a clean system, it is highly recommended to install SP2 to help prevent against future infections.
It's important to always keep current with the latest security fixes from Microsoft.
Install those patches for Internet Explorer, and make sure your installation of Java VM is up-to-date. There are some well known security bugs with Microsoft Java VM which are exploited regularly by browser hijackers.