When I run Spybot, it gets to the part where it looks for a piece of spyware called 'virtumonde.dll' and then hangs. Why doies it do this? Curiously, it happens in Safe Mode too.
The VundoFix tool detects nothing; but why does it hang?

Windows XP SP2
512MB
SpyBot 1.6.0
AVG 8
Windows Firewall

So, first thing to try is to uninstall, reboot and re-install Spybot S&D.

AVG

I haven't reinstalled it yet, but I did make sure that everything was immunized.
AVG found 24 pieces of spyware and removed them; when I turned on this morning, I got an 'invalid system disk' message. There is no floppy or the CD in the drives. The BIOS is fine, any clues?
Good news is the computer has been backed up!

http://www.computerhope.com/issues/ch000229.htm

edit: you obviously read that or a similar guideline so if all else has been done, try a repair install.

In the end, I booted it up with the Linux System Rescue CD, and discovered that the hard disk had failed!
So I purchased a new disk from Dabs (Seagate 160GB SATA) and I'm reinstalling Windows. The particular disk I got needed a SATA driver from a floppy, so I downloaded that (motherboard: ABit V17). However, after formatting with NTFS on the current partition (not a new one), it prompted me to insert a VIA RAID Combo Driver. Why is this? I'm not going to use RAID!

Just to let you know I've solved it, what I was doing is:
I downloaded the drivers and extracted them
downloaded the driver folder to a floppy
it couldn't find txtsetup.oem because they were in a folder, so I went into the folder, and copied the individual files, and it worked!