Major problems (Nail.exe + more possibly)

So my wife was messing with her blog last night, and noticed an odd referal to her site. Unfortunately she clicked on it, and everything went downhill from there. I tried my darndest over about 4 hours before finally passing out, but just can't seem to find the right solution to this problem. Here is what I am looking at right now:

The first problem-

The computer will not boot in regular mode, only safe mode, when attempting to boot normally the following message is given on the blue screen of death:

>>>>>>>
A problem has been detected and windows has been shut down to prevent damage to your computer.

The problem seems to be caused by the following file: ntfs.sys

PAGE_FAULT_IN_NONPAGED_AREA

"A bunch of irrelevant junk about how you should restart, yadda yadda"

Technical information:

*** STOP: 0x00000050 (0xFFFFFFAF, 0x00000001, 0xF7714A4F, 0x0000000)

*** Nfts.sys - Address F7714A4F base at F76E0000, DateStamp 3b7dc5d0
>>>>>>>>>

The second problem-

Every 5 seconds or so while running in safe mode, one of the little "Windows explorer has encountered a problem and needs to close" windows pops up. When you click "dont send" it re-loads the desktop and any folder(s) that you happen to be working in at the time. This does not end after any number of times and makes opening programs to run anti-virus software tough. It makes opening webpages nearly impossible.

More symptoms-

When watching the task manager, I can see "Nail.exe" pop up in the processes list and then disapear just before the error box, this happens nearly every time.

Within the Add/Remove programs list, two quite suspicious programs show up that will not simply remove themselves without popping up a nice little browser window which says "We are not spyware, please don't remove us, but if you really want to, go here and download this, or fill out this survey." I of course have not followed their instructions. The program names are:

OIN (www.outerinfo.com)
The ABI Network- A Division of Direct Revenue

hijackthis log: attached