Win XP Desktop and Taskbar Gone

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I noticed today that my spyware program (Counterspy) detected activity it didn't like. It prompted me to either allow the changes or block. I chose to block and then it repeatedly asked this same question for changes that were trying to be made to multiple locations on my system. I blocked them all, and unfortunatly, Counterspy doesn't provide a detailed enough description of the activity to know what was attempting to make the changes.

Later this afternoon I come back to the computer and attempt to logon to my desktop and it opens only my wallpaper and explorer. Explorer was opened to the desktop. I can access all of the icons from within explorer, but cannot seem to revive the desktop itself. Right clicking on the wallpaper doesn't do anything any longer. Also, when I go to Control Panel, and attempt to click on the "Taskbar and Start Menu" icon, it does nothing.

I've been struggling for the past 2 hours trying to remedy the problem, but without luck. Has anyone experienced similar problems? Have I been victim to a virus? Norton doesn't identify any threats when I scan the system.

Thanks for any input you can provide
 
I keep getting the same thing on my comp. If it persists, put your XP CD in the drive and close the setup window, then go to Start -> Run -> "cmd" (no quotes). In this window, type "sfc /SCANNOW" (no quotes). Let the program scan your computer, restart your system if it hasn't done so, and the desktop should reappear.

I've traced this problem on my machine back to a DLL named "wininet." I think it has to do with Explorer and IE, but it keeps getting corrupted for some reason.
 
Hijackthis Log File

Ok, I've followed all the steps, but I'm not quite sure what is bad and what is good. Can you please review the following and provide some feedback? Thanks in advance for the assistance.

Ooops, helps to continue reading your post. I'll post the log file as you stated in your original post.

Thanks again.
 
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