What's the best way to troubleshoot an XP system that freezes randomly?

I deserve this as I didn't keep my AVG (free edition) anti-virus up-to-date recently, but would greatly appreciate your feedback on this:

My XP computer caught a 'trojan downloader' virus according to my AVG software. :( I found this out after burning the avg tools boot CD on my Mac and loading to the PC. I was able to update and run the software after boot, where it then located and removed the virus.

Now after I boot, my system freezes nearly instantly after 5-10 minutes of running. I don't see any CPU or used memory buildup before it freezes with the system monitor. It just gets hard to move windows all the sudden, then I can't select them while still being able to move the mouse. Then the mouse stops, and I get a beep from the tower if I click the mouse the first time after that. After that, nothing, just a still screen with everything I had open.

Chaos started when I was doing a search for video game tutorials using Google Chrome. I clicked on what looked like a youtube play button, but nothing happened so I kept clicking it (am I an idiot or what?). Then this popup window showed up that looked like virus scanning software, pretending to do a system scan. It was very pretty and well designed. It was not a browser popup window, but was actually running on my computer, with an icon in the task bar. It wanted me to purchase the software to 'remove viruses'. At this point I knew it was a virus. I tried ctrl+alt+del and that window kept closing right away, so I shut off my computer immediately.

Not knowing too much about this, I restarted in safe mode, then used system recovery to go back a week (dumb newb panic move probably). I shut off the computer, and looked up an AVG solution to boot from, doing a scan and clean as described above. After restart I started having the freezing issue right away.

Now, how do I proceed? Is there another boot solution that you would recommend to attempt system fixes? I'm guessing my registry could be messed up somehow, but I'm not the expert in this area at all. Any thoughts?

Thanks much,

Chris

System Stuff:
Dell XPS (heavy as hell)
4GB RAM (I think)
Dual core processor of some sort and speed
100GB, and 300GB hard drives
Windows XP Professional (service pack 3)