Programs fail to launch/install on XP after System Restore

Ok, here's one for you guy's. I've recently been away from home a lot, when I got assigned a paper to write for one of my uni classes I sat out to work on it on my home computer. When I turned it on I was greeted with a changed wallpaper (one with red and white text over a field of blue binary that had at least two spelling mistakes (Including the bastard of a word "your're")) that told me that my computer had virus's, spyware and shit. I was also greeted by two little programs running (or at least I assume they were running... more on that later) telling me I had much of the same. One of these was something along the lines of Toolbar Security or some such. Anyway, I figure it's nothing much and do a right click on the start bar to pull up task manager to kill them manually.

This is when shit I've never seen happen because of a virus started up. It told me that task manager couldn't be pulled up because it was "infected" and told me to launch my antivirus. Not only was task manager "infected" but everything else I tried to launch; AVG, Spybot Search & Destroy, Firefox, anything. Well, anything but IE... for some bastard reason that worked.

So this is nothing new to me since I've had this computer for nearly some seven years now. I set off to do a System Restore like I would normally do. At first glance this worked fine and aside from all the updates I had to get to make XP work like it should everything was fine. Then I started to try and reinstall my programs, starting with FF. Now, I'm no expert but after the third time I cycled through uninstalling and reinstalling FF I realized it wasn't the installer that was messed up. But I figured I'd give it one more chance for a completely clean wipe and went in to the application support files to retrieve my old bookmarks before I deleted everything related to FF on my computer.

That's when something else that's never happened to me before occured. I couldn't access FF's application support files. I couldn't access any application support files save for Microsoft's (again for some unknown reason). I thought this might be because their marked read only, so I tried changing that... didn't work.

So far I've got only IE (cause I'll be damned if I use IE6), Windows Media Player, Spybot and AVG to update/reinstall. I can't run Word Works which came with the computer and I have a paper due (the printer hooked up to this can't hook up to my macbook). I've been unable to find anything about any problem like this online (though I continue looking). Does anyone have any idea how to fix this?