Quoted: Ohh yeah any way I could tell if the hard drive is bad before I go and start doing all of this stuff?
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part of install should allow for format of drive. during this step choose complete format (as opposed to quick or some similar wording). That should pick up (fail) disc problems.
BTW.. be careful about restoring the backed up stuff. Some things cannot be detected by any normal anit-virus, firewall, and anti-spyware software.
once you get back up, google rootkits....
the way i fix computers like yours, is to mount the 'problem' disk in a second computer and scan. after that clears, i reinstall the disk and run hijackthis. But i know what to look for in hijackthis (a fairly arcane program). in your case, since you are actually missing files you are probably beyond this type help.
finally, if you dont do so, install and use firefox instead of ie. firefox is not perfect but it is tougher than ie...