^^ Yeah I agree, I would also personally recomend Spybot Search & Destroy, now as per ur Log file,
Now i see that u dont have the SP2 installed
Install the Windows XP SP2 You may download it from here, Windows XP SP2
All ways Turn off the System Restore. before u attempt to scan of clean ur system....
O4 - Global Startup: MS_update_0704_KB74073.exe
Remove this one, click the Check Box and then hit Fix....
After you install the SP2 then if needed run a scan using Online Scanner of Kaspersky, *www.kaspersky.com/virusscanner
Off Topic, You dont have IE7 too, its safer than IE 6.0 use it if you are not using FireFox or Opera