Just 2 questions and 1 request.

1st Question: Is wscript.exe running inside your Task Manager?
2nd Question: Windows XP 32Bit SP2 is very vulnerable. I understand you have Apps you want to keep, but do some investigating. They should work with SP3

Request: go to http://forum.avast.com/index.php?topic=53253.0 and attach MBAM, OTL & aswMBR

Edit: 1 more request. Find that folder/file. Upload all 3 to www.virustotal.com and attach all three scan repots.