Possible Malware, Computer Virus - Programs will not launch from Start Menu or Desktop -Dell Deminsion 2400

Hello,

Computer:  Dell 2400 Dimension (2003 )   OS:  Windows XP Home with Full Office Suite, Norton Anti Virus, No Current Internet on this machine)

 Processor: Pentium 4, with 2 GB Ram.  and Window XP Home Ed.

When I try to open any program fro the start menu, they do not start.  For Example:   MS Word, or MS Excell, will not launch from the Start Menu, or from Desk top.  the command line under  "Run"  will not start from the start menu,
and I get manytimes the "Choose the program you want to use to open this file, or "File not Found" error

Also I cannot run "Norton Anti-Virus."   I tryed to see if I could find a virus.  The last time I had a virus it did this and I had to re-format, or re-image, with Dell Support 

Also, when I try to open MS Word, or MS Ecell it says:  ERROR, application not found. 

I was able to run "a Spybot " Search and Distroy" spyware detetor and it found 7 HKEY - possible extention hijack, and DSO Exploit (what ever that is)  peices of spyware.

Should I reformat hard drive? and reinstall XP?

[edited by: pompano15 at 1:29 PM (GMT -6) on Wed, Mar 17 2010]

 I found that there was a spyware or malware running in the Processes in Task Manager. 

It looked like a Norton or Symantic Process,(  see www. Tasklist.org )  But after searching process names in tasklist.org, I found out it was mal ware.
My plan now is to replace the Hard drive with a similar 3.5 inch form, 80GB, Paraelle ATA type HD in the next couple of days, and reload Windows XP, drives ect. according to the attached Tag:  Formating hard Drive.