Virus or corrupt file?

While starting a streaming video, a security balloon opened claiming I was infected with a virus (which I wasn't)and began scanning my machine. Unable to stop the scanning, I manually disabled my network connection,and killed the scanning process with task manager. None of my security software indicates a... show more While starting a streaming video, a security balloon opened claiming I was infected with a virus (which I wasn't)and began scanning my machine. Unable to stop the scanning, I manually disabled my network connection,and killed the scanning process with task manager. None of my security software indicates a change to the registry, but installed software and most windows software will not run unless forced,and does not function properly. Errors include "can't find rundll32" which is critical to software to correct the problem. The file is where it should be,and checks valid.
Anyone know a recent virus or system problem that may cause this?
This is very similar to a virus I had to deal with a couple years ago, but this has me pulling my hair out.
The system runs XP pro/sp2, AVG and SpybotSD were running.
Any help from hackers or guru's would be hot. TNX
Update: Thanks so far people; Al, I;m sure I caught it before it could do its intended function,but not without causing damage. John, The registry checks good and I can't find any issues manually sifting through it. And sisu, any virus is dead and nothing more than file(s) taking up space. Correcting the damage is the... show more Thanks so far people; Al, I;m sure I caught it before it could do its intended function,but not without causing damage. John, The registry checks good and I can't find any issues manually sifting through it. And sisu, any virus is dead and nothing more than file(s) taking up space. Correcting the damage is the issue.Windows explorer is the 'only' program that appears to run properly. System restore goes through the actions, but does nothing, Regedit,hex workshop,and other brute force softwares can't find critical system files,but they are there and check good(crc) even the boot sector checks.
Any thoughts are greatly appreciated,but I have a LOT of software that would have to be reinstalled if I have to go that route.
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