I don't recommend updating to SP2 until after you've got your system clean; see this thread for more info about SP2:
http://www.daniweb.com/techtalkforums/thread10031.html
You need to put hijackthis in it's own permanent folder before you fix anything with it. HJT creates backups in case something goes wrong, and if it's in a temporary folder, as you have it now, they could accidently be deleted. A folder like c:\hjt\hijackthis.exe is suggested.
After you've moved it, close all browser windows, scan again and post a new log.