help remove spyaxe

I have a year old Dell 3.2 gig Dimension 8400 w/1 gig RAM. I have an alert "Your computer is infected!" Dangerous malware, etc. It is spyaxe. How can I get rid of it. I'm not a GEEK and need specific instructions please. I use AOL dialup but am going to Comcast Cable Internet this Saturday. How can I best protect my system? I have McAfee subscription service which is up to date as of 12/27; Ad-Aware, Spybot free stuff updated 12/27; Spy Sweeper and Window Washer updated 12/27. I run everything every time I log offline, but spyaxe got through. I downloaded uninstallers.zip supposedly from Spyaxe to remedy the problem. Only one of the two files were there and it did not remove spyaxe. Now what....please. I had to do a full reformat a few months ago and don't want to go through that again. Are there other protection programs I need to get, keep updated and run all the time to protect myself in the future?
Thanks to the genious who helps make this go away.

 

It seems that everything is OK again, thanks.
I have attached the smitfiles.txt.
I clicked on the Panda Active Scan in your instructions and followed everything from the Panda site. There was no Autoclean box to check and I don't think a scan was performed. Nothing is on my desktop about Panda. I probably did something incorrectly?
When I was going through the smitrem stuff, I saw no HijackThis to run, so I just clicked the smitrem and followed the blue dialog box instructions. There was no system scan option and there was no list to pick from. I hope I didn't screw something up! Also, when I rebooted in normal mode, I got a box stating that delfiles.cmd couldn't be found. Do I need to do something about this? If so, how? Must be comforting to be a Geek! I know how to use my programs but have only a basic understanding of how stuff works and how to keep it working. What is different about this Panda software from the McAfee subscription stuff I have? Should I have it too along with my Spysweeper, Ad-Aware, Spy-Bot, Window Washer? What is the best stuff to have and run? This can get quite expensive if it's not freeware.
Thanks again for at least helping remove the spyaxe crap. Hopefully you can answer my other questions some time.

 

Here is the .log file. I hope I'm doing this cleanup correctly. I only ran the Hijack this time after following your instructions. I have printed out all the instructions just in case I need to go through this again some day farrrrrrrrrr in the future!
Thanks again.