Can't launch system applications. Several application errors.

Recently my computer has started displaying the "svchost.exe Application Error" message. There is also another window that appears frequently that says "Generic Host Process for Win32 Services" and then "Generic Host Process for Win32 Service has encountered a problem and needs to close."

Usually after I close these messages, or have been using the computer for a little while (maybe 20-40 minutes, it depends), my computer starts freaking out. Everything starts running slow and freezes (and sometimes un-freezes a few minutes later), the toolbar at the bottom of the screen will freeze (so I cannot access the Start menu), and the taskbars at the top of windows (and usually the toolbar) will revert to a Windows 98 type look.

I don't know what to do to fix these problems, your help and advice will be much appreciated!!

First thing, you should alwasy state your OS and computer type (notebook or desktop) when requesting help. Also if possible the exact "svchost.exe Application Error" error as this it too generic.
That said:
Have you tried a restore point to a time when it was performing correctly?
You can also do a file run: SFC /Scannow to repair missing windows files. This will require you Windows CD unless you have a restore partition.
Since this is happening after the computer is running for a while, are you having overheating issues? Especially essential with notebooks.

Have you run an updated Virus Scan? Malware scan such as malwarebytes or Superantispy?

Run a checkdisk and a defrag?

More info please RebKit

It's an HP mini-notebook, OS Windows XP Pro 2003 Sp3, no cd drive, no internet. Please let me try to explain the state the system was in when I began working on my sister's laptop 3 days ago and where I am today. When I first started working on it I couldn't access anything except Task Manager. Windows would freeze after logon and the svchost.exe application error would pop up (see below).

svchost.exe - Application Error
The instruction at"0x73411c8b" referenced memory at "0x00000007". The memory could not be "written". Click on OK to terminate the program. Click on cancel to debug.

If I Click OK I get another one that says:
svchost.exe - Application Error
The instruction at"0x75abae15" referenced memory at "0x00000000". The memory could not be "written". Click on OK to terminate the program. Click on cancel to debug.

After these errors the desktop would black-out and lose its formatting like Win98. The system would come to a halt while the start menu, desktop icons and right clicking of the mouse didn't work. I could hit 'Ctrl' + 'Alt' + Del to pull up Task Manager where I opened command prompt to type rstrui.exe, but when I'd hit enter I'd get a message saying "The command is not recognized..."

After many failed attempts of trying to access System Restore (even tried in Safe Mode), I entered chkdsk f/ r/ in CMD and restarted Windows. After about 4 to 5 hours of scanning Windows restarted to the normal Desktop background with working start menu, desktop functionality.

I still get the svchost.exe application errors, along with a win generic host error and some other errors.

- I tried changing the registry to close ports 445 and port 135 to make the errors stop (according to some people it worked for them) BUT this has NOT worked for me.

- I tried installing Avg free to scan for virus' but when I try to open it I get this error... C:\Program Files\AVG\AVG9\avgui.exe The application has failed to start because the application configuration is incorrect.

- I installed Malwarebytes and did a full scan but it showed no infected files.

- I downloaded and installed TFC to clean temp folders.

- I downloaded GMER and did the rootkit scan but it didn't produce anything.

- I tried DDS but it didn't produce any files

I think I just about covered most of what I've already done. Please let me know if you have any questions. Oh, I'm in the process of scanning the registry with CCleaner. Thanks for your help!