The DatabasePath key is showing "%SystemRoot%\System32\drivers\etc" as its value, is this correct?
Edit: Think I found what originally caused the problem. When I have no hosts file in the windows folder or the etc folder, spybot creates the hosts file in the etc folder. When I made a hosts file in the windows folder, spybot added its entries into the hosts file in the windows folder. So I guess originally I had a blank hosts file in the windows folder and spybot just added its entries to that.