Can't start programs!

I use Windows XP proffessional
Zone Alarm firewall
AVG anti virus
CCleaner
Adaware
A Squared
Spybot
Spyware Terminator
RemoveIt
All of which I update daily.

A couple of days ago I suddenly found that if I double click on any program or folder on my desktop it will not open or run. Same thing if I right click then click on "open". Same again going from Start to the program. Only way I can get things to run is via Task Manager.
Also items which should be in Task bar at startup are not there. (Zone Alarm. Spyware terminator. Advanced Windows Care)
I was told that someone ("friend" of a relative) hacked into the computer and it seems likely from the info given. (Dont know how through Zone Alarm though) and I suspect some maleware installed on it. I have tried to work through the Read this first section, but when I put "MSCONFIG" in Run and click ok, nothing happens! Is there another way to get this to run through task Manager maybe?
I have run all the above programs after checking updates. AVG is the only one I can get to run in Safe Mode. I have also tried the MS help suggestion "Can't open exe files".
Restore was already turned off (not by me, only user!) So I can't restore to an earlier time.
I tried downloading and runing Sophos anti rootkill, but it said it could not run on this version of Windows.
Any suggestion or help welcome please?

 

Many thanks for all suggestions given. I found the problem. An item (Program/virus?) on my computer called "Killbox!" I did not recognize it and put it in the recycle bin. Everthing was then back to normal, so emptied the bin.