Possible DNS Virus?

Good move...

I got the SP2 Denied Access issue figured out Broni. What I ended up doing is going into regedit and giving the Administrator Group Full and Read Permissions for the HKEY_CLASSES_ROOT hive.

For some reason, the Admin did not have these permissions, so when SP2's installation tried to change some of the registry keys, it was denied and the installation was stopped.

I read somewhere that you had to have SP1a installed or SP2 installed before you were allowed to install SP3. Is this true? If so, I don't think I had SP1a, it was just SP1.

Thank you very much Broni for going through this with me. I learned alot. Thanks to themanwhowas for his input as well. Still wish I knew how to properly read a HJT log though. :D

So to summarize, I had to do a repair installation of Windows XP Home to remedy the DNS issue. I guess we'll never know what actually caused the problem.

You're very welcome :)
I'm very glad, your problem has been fixed :)