Malwarebyte's found "Trojan"

Files Infected:
C:\install.exe (Trojan.Agent) → Quarantined and deleted successfully.

I ran a scan with AVAST and it missed the above.
Malwarebytes found it and the results are displayed above.
When I right click on "C:\install.exe (Trojan.Agent) “Malwarebytes Anti-Malware” did not give me the option to quarantine the Trojan only delete.
My question is what do I do now. Is it necessary to run the recovery disc to an out of box state or what?
I am running “Windows XP Home Edition”.

MBAM normally just gives, the Remove selected, but when the log appears it should say deleted and quarantined.

No it shouldn’t be necessary to run the recovery disk.

To be sure you’re clean, I suggest:

  1. Clean your temporary files.
  2. Schedule a boot time scanning with avast with archive scanning turned on. If avast does not detect it, you can try DrWeb CureIT! instead.
  3. Use MBAM (or SUPERantispyware or even Spyware Terminator) to scan for spywares and trojans. If any infection is detected, better and safer is send the file to Quarantine than to simple delete them.
  4. Test your machine with anti-rootkit applications. I suggest avast! antirootkit or Trend Micro RootkitBuster.
  5. Make a HijackThis log to post here or this analysis site. Or even submit the RunScanner log to to on-line analysis.
  6. Disable System Restore and then reenable it again.
  7. Immunize your system with SpywareBlaster.
  8. Check if you have insecure applications with Secunia Software Inspector.