unable to use ie browser or update any programs

Hello out there.
I obviously have a problem or I wounldn't be here so here goes and any help would be greatly appreciated.
I have 2 computers networked together sharing a dial-up connection with satellite download. The first is a 1.3 ghz compaq 512 mb ram with win xp home ed sp2, the second is an older compaq 366 mhz with 64 mb ram running win 200 pro. This configuration has worked great for the last 20 months or more. Problem started with the win xp machine - when web browser is open I get "cannot find server - Microsoft Internet Explorer" and the page cannot be displayed message. I cannot navigate off this page by typing in the address bar or by selecting favorite web sites. I have tried to do the basic removal instructions but the browser won't connect to the online virus checker sites. I have tried to run the standalone virus remover tools like spybot and spyblaster but the computer will not let these programs update. The win 2000 computer was able to use ie browser for about 20 minutes more than the other machine when it received the same message and started behaving the same way. I am able to post through a 3rd computer, a laptop, win 2000 which I use at work and have it networked with the win xp computer (I have removed the win 2000 pc) Funny thing is that the network allows me to share the dialup connection and even the satellite download connection without any problems but the win xp computer still cannot browse. I can do a hjt scan on the win xp computer but only from the desktop (any program I try to install eventually gives an error message that components are missing - this applied to most of the spyware removal programs) I am able to download using the laptop then transfer files to the win xp pc.
Like I said any help would be appreciated .