Yeah, this one is going popular I guess!
Neways, the fix is simple! The virus simply copies 3 files in ALL THE PARTITIONS and then when u reinstall windows, it simply auto executes from the files copied to different drives/partitions.
Fix : U need to get those files removed FROM ALL THE PARTITIONS.
Files : 'smss.exe', 'Funny UST scandal.avi.exe', 'autorun.inf' (in all the partitions) and then 'killer.exe', 'net.exe', 'net1.exe' AFAIK in c:\windows\system32
U can search for where the last 3 files exist.
Probably, u won't be able to delete those files as the explorer closes if u open task manager, run anti-infection-ware or try to access those files.
So, the best way is to get a knoppix cd, and delete these files manually and may be then do a reformat+reinstall as a last option!!