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I found this CNET article from 2006 that discusses how to approach security (I realize things have advanced since then). There's nothing new or surprising, but I'm wondering what approach to "castle building" you use?

My approach has been:

• firewall (was ZA, but am trying Online Armor and really like it)
• antivirus (was AVG, but just changed to NOD32)
• occasional trip to TrendMicro Housecall or Kapersky Free Virus Scan, just to doublecheck my antivirus
• disk cleaner every few days (CCleaner)
• don't use IE (currently using FF)
• safe surfing

I had AdAware for a long time, but stopped using it because it never found anything but cookies.

The CNET article recommends using ZA Free as a firewall and Online Armor as anti spyware. Maybe Online Armor was different then, but the current version is an excellent firewall (typically beats ZA Pro in tests) with spyware protection, so it seems ZA is redundant.

Speaking of adware and spyware, how good are the better antiviruses at handling them? With a strong antivirus like NOD32, would AdAware be redundant?

You say you use fire fox? If you want to stop get the addon NOScript ( http://noscript.net/ )

As the name suggests it block all scripting and allows safer browsing.

I find the best approach is still prudent user surfing habits.
Personally I use the following:
Comodo
AVG Antivirus
Spybot
CCleaner (Occasionally)

I've not been infected ever since I've joined techspot; I got rid of my infections and learnt to protect myself from malware after then.