If i were in your shoes i would do a system restore first it is not as painful as reinstall all system. I found instructions, how to do that. Hope it will be helpful.

An advice would be, DO NOT delete registry if you do not know which entries exactly belongs to virus, because you may delete entry, which is vital for your system. I thing that deleting registry entries possibly caused the RUN command missing from menu. Also, after you restore your system, you can run HijackThis fresh log and post it here for someone to look. It might be helpful to fix your problem.

Yes. I only delete the katchem.exe from the entry. It won't work because there is something else in the registry that run katchem. I decided not to go further.
I've tried the restore using F11 (no way to do it from the pop up menu, it won't execute), there is none to restore. The owner of the computer should have run restore asap instead of trying to fiddle around to fix it.
I'm gonna just back up files (thank God they are very few files to back up). Then reformat the hard drive.
Before I reformat, I need know about Dell's XP Home. I have my own Dell Reinstallation XP Home CD but not theirs. I wonder if the key on the CD will accept their key that is found on the case.
Thanks for the infos on Spyware page. It is so rude to mess around other people PERSONAL computer!
Cathy

the CTRL-F11 can only be performed during boot up from a cold start. when you see the blue bar with www.dell. com you have 2 seconds to press those keys to do the ghost image restore. keep in mind that this option is only available on computers that were purchased from dell directly after 12/1/04. if it was purchaced before this date you should have a set of cd's. a purple disk for windows reinstall and one or two blue disks, 2 blue disks, #1 will be the drivers/diagnostic tool/utilities/online documentation. #2 should be a modem driver disk with internet tools.

To reinstall windows from the cd  www.windowsreinstall.com has a great walkthrough.

once windows is reinstalled you need to put the drivers/diagnostic tools in the cd rom drive and let the program run..

then start with the controller software, which should be the intell chipset

then you need to install the video, audio, and network adapter, then the modem. then reinstall all the programs you want on the computer like antivirus,firewall, and spyware protection.

Is your computer the smae make and model as theirs? if not your CD will not work on their computer it will say "incorrect product code"

Yep, I tried to run reinstall from the CD. It doesn't work. I decided to reformat the hard drive (already made backup of doc/pic files).
Question is.... Is the Dell Windows XP reinstallation CD a full version of XP? I'm not familiar with Dell. I've reformat and install Windows 98 on my old computer due to stupid spyware/virus. I've never done it with Windows XP. Their Dell don't have floppy drive only two CD Drives. I'm not going to use my Dell Win XP CD that I bought a year ago. They will have to give me their own to reinstall in their computer.

I discovered this a couple of days ago on a relatives PC I repaired, the virus Katchem disables Task Manager & the ability of running programs through the run option. It is also linked with the trojan-backdoor kernels64.exe which is loaded by Katchem. This backdoor sends out a message with your IP address to various websites indicating that your computer is now compromised. The Katchem virus also replaces every non-critical executable in the system with itself, but named as the original program. Filesize of of 258-259kb & kernels64.exe size of 8kb. Since every 3rd party program installed was now stuffed by the Katchem virus, & not knowing if the system was any further compromised than the above mentioned I was forced to backup all documents & photos etc. using a boot disk & low level format & reinstall. The back-uped data was throughly checked with 4 virus checkers & 2 trojan checking programs & then put back on the installed system.

I believe it does, including extra drivers for the system. I haven't used the install cd's Dell provide for a while. You might need to contact dell directly to discover the answer to that question. Unless someone else knows the answer with certainty.

Forgot to add infos....

The computer is Dimension 8300, it has CD, Cd-RW, SATA 120 GB Hard Drive. I don't know when they bought it. What I see was the Microsoft COA sticker on the case said '2004'.

the windows from dell is a full instalation but there is a seperate disk that holds all the drivers