Before you run AVG AS it is nice to run a cleaner first to remove the cookies which clutter the AVG log. Anyway, to give us a quick glance at the state of your sys, would you pls do this...
HiJackThis
===hijackthis: http://216.180.233.162/~merijn/files/HijackThis.exe
-install it to a new folder alongside your program files.
-in that folder start HijackThis by dclicking the .exe; now close ALL other applications and any open windows including the explorer window containing HijackThis.
-Click the Scan and Save a Logfile button. Post the log here.

Thank you for your response, here is my log of Hijack this:
Logfile of HijackThis v1.99.1
Scan saved at 11:30:46 AM, on 16/04/2007
Platform: Windows XP SP2 (WinNT 5.01.2600)
MSIE: Internet Explorer v6.00 SP2 (6.00.2900.2180)

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\brsvc01a.exe
C:\WINDOWS\system32\spoolsv.exe
C:\WINDOWS\system32\brss01a.exe
C:\Program Files\Grisoft\AVG Anti-Spyware 7.5\guard.exe
C:\Program Files\Norton SystemWorks\Norton Utilities\NPROTECT.EXE
C:\Program Files\Panasonic\TrapMonitor\Trapmnnt.exe
C:\WINDOWS\System32\svchost.exe
C:\WINDOWS\Explorer.EXE
C:\WINDOWS\System32\hkcmd.exe
C:\WINDOWS\SOUNDMAN.EXE
C:\PROGRA~1\NORTON~1\WinFax\WFXSWTCH.exe
C:\WINDOWS\system32\wfxsnt40.exe
C:\Program Files\Java\jre1.5.0_11\bin\jusched.exe
C:\Program Files\Hewlett-Packard\HP Share-to-Web\hpgs2wnd.exe
C:\WINDOWS\system32\ctfmon.exe
C:\Program Files\Adobe\Acrobat 5.0\Distillr\AcroTray.exe
C:\Program Files\SEC\Natural Color\NaturalColorLoad.exe
C:\Program Files\Panasonic\Panasonic-DMS\Port Controller\Mfpscdl.exe
C:\Program Files\Hewlett-Packard\HP Share-to-Web\hpgs2wnf.exe
C:\Documents and Settings\Administrator\Desktop\SpyWare-Software\HijackThis.exe

R0 - HKCU\Software\Microsoft\Internet Explorer\Main,Local Page =
R0 - HKLM\Software\Microsoft\Internet Explorer\Main,Local Page =
R1 - HKCU\Software\Microsoft\Internet Explorer\Main,Window Title = Microsoft Internet Explorer fourni par Internet d'affaires
O2 - BHO: AcroIEHlprObj Class - {06849E9F-C8D7-4D59-B87D-784B7D6BE0B3} - C:\Program Files\Adobe\Acrobat 5.0\Acrobat\ActiveX\AcroIEHelper.ocx
O2 - BHO: SSVHelper Class - {761497BB-D6F0-462C-B6EB-D4DAF1D92D43} - C:\Program Files\Java\jre1.5.0_11\bin\ssv.dll
O2 - BHO: Google Toolbar Helper - {AA58ED58-01DD-4d91-8333-CF10577473F7} - c:\program files\google\googletoolbar4.dll
O3 - Toolbar: &Google - {2318C2B1-4965-11d4-9B18-009027A5CD4F} - c:\program files\google\googletoolbar4.dll
O4 - HKLM\..\Run: [IgfxTray] C:\WINDOWS\System32\igfxtray.exe
O4 - HKLM\..\Run: [HotKeysCmds] C:\WINDOWS\System32\hkcmd.exe
O4 - HKLM\..\Run: [SoundMan] SOUNDMAN.EXE
O4 - HKLM\..\Run: [WFXSwtch] C:\PROGRA~1\NORTON~1\WinFax\WFXSWTCH.exe
O4 - HKLM\..\Run: [WinFaxAppPortStarter] wfxsnt40.exe
O4 - HKLM\..\Run: [SchedulingAgent] mstinit.exe /firstlogon
O4 - HKLM\..\Run: [SunJavaUpdateSched] "C:\Program Files\Java\jre1.5.0_11\bin\jusched.exe"
O4 - HKLM\..\Run: [Share-to-Web Namespace Daemon] C:\Program Files\Hewlett-Packard\HP Share-to-Web\hpgs2wnd.exe
O4 - HKLM\..\RunServices: [SchedulingAgent] mstask.exe
O4 - HKCU\..\Run: [ctfmon.exe] C:\WINDOWS\system32\ctfmon.exe
O4 - HKCU\..\Run: [swg] C:\Program Files\Google\GoogleToolbarNotifier\1.2.1128.5462\GoogleToolbarNotifier.exe
O4 - Global Startup: Acrobat Assistant.lnk = C:\Program Files\Adobe\Acrobat 5.0\Distillr\AcroTray.exe
O4 - Global Startup: Microsoft Office.lnk = C:\Program Files\Microsoft Office\Office10\OSA.EXE
O4 - Global Startup: NaturalColorLoad.lnk = ?
O4 - Global Startup: Panasonic Communications Utility.lnk = C:\Program Files\Panasonic\Panasonic-DMS\Port Controller\Mfpscdl.exe
O8 - Extra context menu item: E&xport to Microsoft Excel - res://C:\PROGRA~1\MICROS~3\Office10\EXCEL.EXE/3000
O9 - Extra button: (no name) - {08B0E5C0-4FCB-11CF-AAA5-00401C608501} - C:\Program Files\Java\jre1.5.0_11\bin\ssv.dll
O9 - Extra 'Tools' menuitem: Sun Java Console - {08B0E5C0-4FCB-11CF-AAA5-00401C608501} - C:\Program Files\Java\jre1.5.0_11\bin\ssv.dll
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
O12 - Plugin for .spop: C:\Program Files\Internet Explorer\Plugins\NPDocBox.dll
O14 - IERESET.INF: START_PAGE_URL=http://fr.bellnet.ca
O16 - DPF: {6414512B-B978-451D-A0D8-FCFDF33E833C} (WUWebControl Class) -

http://v5.windowsupdate.microsoft.co...?1106253359140
O16 - DPF: {F127B9BA-89EA-4B04-9C67-2074A9DF61FD} (Photo Upload Plugin Class) - http://costco.pnimedia.com/upload/ac...pv2.0.0.9.cab?
O18 - Protocol: livecall - {828030A1-22C1-4009-854F-8E305202313F} - C:\PROGRA~1\MSNMES~1\MSGRAP~1.DLL
O18 - Protocol: msnim - {828030A1-22C1-4009-854F-8E305202313F} - C:\PROGRA~1\MSNMES~1\MSGRAP~1.DLL
O20 - Winlogon Notify: AutorunsDisabled - C:\WINDOWS\
O20 - Winlogon Notify: igfxcui - C:\WINDOWS\SYSTEM32\igfxsrvc.dll
O20 - Winlogon Notify: WgaLogon - C:\WINDOWS\
O23 - Service: AVG Anti-Spyware Guard - Anti-Malware Development a.s. - C:\Program Files\Grisoft\AVG Anti-Spyware 7.5\guard.exe
O23 - Service: BCL easyPDF SDK Loader (bepprldr) - Unknown owner - C:\Program Files\Common Files\BCL Technologies\easyPDF 4\bepprldr.exe
O23 - Service: BrSplService (Brother XP spl Service) - brother Industries Ltd - C:\WINDOWS\system32\brsvc01a.exe
O23 - Service: Google Updater Service (gusvc) - Google - C:\Program Files\Google\Common\Google Updater\GoogleUpdaterService.exe
O23 - Service: InstallDriver Table Manager (IDriverT) - Macrovision Corporation - C:\Program Files\Common Files\InstallShield\Driver\1050\Intel

32\IDriverT.exe
O23 - Service: Macromedia Licensing Service - Unknown owner - C:\Program Files\Common Files\Macromedia Shared\Service\Macromedia Licensing.exe
O23 - Service: Norton Unerase Protection (NProtectService) - Symantec Corporation - C:\Program Files\Norton SystemWorks\Norton Utilities\NPROTECT.EXE
O23 - Service: Panasonic Trap Monitor Service - Panasonic - C:\Program Files\Panasonic\TrapMonitor\Trapmnnt.exe
O23 - Service: Speed Disk service - Symantec Corporation - C:\PROGRA~1\NORTON~1\SPEEDD~1\nopdb.exe

well, that did not show anything. I think you shall have to give the room more clues, a bit more info on the exact nature of the problem.
[you have broken cydoor, which is annoying adware trash, so don't expect your kazaa to run anymore... ]

Okay, as mentioned previously my IE does not load up I see the ieplorere.exe running in the task manager but nothing is happening. The system stops responding if I leave the computer idle for more than 5 mins, meaning if I try and open any folder on my desktop or open any application such Outlook express, Mozilla the system does not respond. In order to solve this problem I have to keep logging out and logging back in every time, it is very annoying.
Would you like me to attach a snapshot of processes running on my machine maybe there is something that is not supposed to be there. I have also tried removing and re-installing IE but that does not do anything. I am not running kazza and I haven't used it more then a year now.
Thanks in advance,
Amit

I actually do not know how you removed IE from XP SP2: it is integral. If you worked via CP > windows components, then that only stops it running, but does not remove it; likewise rechecking that box does not reinstall it. The only way I know how to do it is via windows Repair installation option in windows Setup on the XP SP2 install cd. That is, I know that way works, for sure.... but you must then reinstall all windows updates. But I have used windows .inf files to repair Outlook Express and I see no reason why you cannot try the same with IE - I'd like you to give it a shot....and tell me how you get on. Simply open C:\windows\inf, rclick ie.inf and select Install - you will receive prompts [insert XP SP2 cd etc.].
This next will not actually repair IE, but there may be a "related" problem which is stopping it displaying, and you should try this before the previous method because it will not result in your having to reinstall any other components such as updates: you could run system file checker with that install cd - go Start > run, type:
sfc /scannow - and insert your cd when requested.
Please let me know how you get on..