My daughter was playing a PC game last night when it minimized and went to the desktop. (The game should not be the cause, it's one of the free Monopoly game downloads that McDonalds gave out a few years ago). Our background had been changed to an image that said that we'd been infected and we kept getting pop-ups (the regular rectangular system-warning type and the little corner ones) wanting us to install anti-spyware software. I rebooted in safe mode and it said that we had been infected by Worm.Win32.NetSky (a level 5 on a 0-5 scale) and some of our personal information might be stolen, including passwords. I upgraded my Spybot S&D and ran it, then restarted it to run it again. Since then, the screen logs off immediately every time you try to log on, including in Safe Mode. I did a google search and already copied userinit.exe to wsaupdater.exe in the System32 folder during Windows Recovery. The problem still persists.
The PC is a Dell, and I do have the Dell Windows XP Home Edition Reinstallation CD.
I'd considered running a repair install, but I'm concerned about data loss (The Microsoft website indicated that we may lose some, but they weren't specific as to what exactly). We have all of our family photos backed up on CD, but there's other documents which I would hate to lose. I am also not the primary user of the PC, so I would prefer not to make that call unless absoluately necessary.