spyware virus - security total -

I've read your "read me first" unfortuately I can't do any of the suggestions. The trojan has taken over my computer. When I try to start in "Safe Mode" a blue screen appears with a warning. Says computer is infected blah blah "Run CHKDSK/F then blah blah "Technical information STOP:0x0000007b (0XF7BBA524, 0X0000034, 0X00000000, 0X00000000). If I leave windows open (regular mode) the blue warning screen appears after about 5 minutes. telling me to shut down and open in safe mode. I don't think this is a windows message, I think it's the trojan. When I press f8 and enter safe mode the same message/window appears. I don't think I'm in real "safe mode"

The new program (trojan) left a shortcut on my desktop with the file path DocumentSetting\all users\applicatons\16695934\16695934.exe". I can't delete (access denied)
can't run mcafee, registry, system restore, internet or any program.
Have a malwarebytes scan on a flash drive. Won't let me run, says it's infected. It's says everything is infected.

running windows xp home edition version 5/1 - sevice pak3.
Prior to this infection, I was infected with a similiar but different spyware trojan. I managed to get rid of from malwarebytes from geekstogo.com. while I was posting a thread on their site I was reinfected with this new trojan. (my computer was clean for about 30 minutes).

Prior to this new infection my windows update was disabled. I could not enable. even after getting rid of the first trojan.
I cleaned the trojans, shut down computer for the night. restarted the next morning went to geekstogo.com posted a thread and was reading others when I started getting pop ups about a spyware virus program. I didn't visit any other sites. Suddenly the virus scan started and the false alerts and was locked out of all programs.

so either it was lurking in the background or I was infected simply by being connected to the internet since my windows update are not upto date. (can't believe I was infected on the geekstogo.com website)

Any suggestions or assistance would be deeply appreciated. It's my son's laptop and college starts next week.