Help with IE 8 errors, possible malware.

I'm trying to help a remote user (I can connect via LogMeIn) with a PC that has multiple errors; I'm suspecting malware, but need help to sort out the issues.

It's a Window XP Pro PC with SP3.

1) When you start IE 8, it opens a window with "about:SecurityRisk" in the address bar. There's an option to click on "Your current security settings put your computer at risk. Click here to change your security settings..." Doing this doesn't solve the issue.

I also notice multiple iexplore.exe processes get launched even though there's only 1 window with 1 tab open.

It seems like I cannot get any changes to stick either. The Welcome to IE 8 wizard appears every time no matter what settings are chosen. Once you bypass this a window pops up with an error: "A program on your computer has corrupted your default search provider setting for Internet Explorer"

Clicking "OK" brings you to the Manage Add-ons screen, but again - no matter what you change here, the settings don't stick; you have to do this every time.

2) Once you bypass everything, and get browsing, it's very slow:

- You cannot connect to https sites. (IE cannot display the webpage)
- You cannot download files (IE cannot download <filename> from <website>. IE was not able to open this Internet site. The requested site is either unavailable or cannot be found. Please try again later)

I have tried uninstalling IE8, then reinstalling through Microsoft Update.

3) You cannot install malwarebytes.It gets partway through the installation and then gives an error: "Error creating registry key: HKEY_CURRENT_USER\SOFTWARE\Malwarebytes' Anti-malware. RegCreateKeyEx failed; code 5. Access is denied."

The user is a member of the local Administrators group.

I was able to install superantispyware from a USB drive and run a scan which found only cookies, and one thing it classified as an unknown trojan "toolbar.dll".

Lastly, I can't seem to make changes to some general Windows settings either. For example, I can't seem to add the My Computer icon to the Desktop, or get my settings for Task Manager to stick.

Something is seriously wrong here.

What can I do?

thanks!