Hey PK at this point ???
"If u are getting this error Explore.exe is not a valid win32 application do the following

insert the winxp cd in the cd drive and run this command sfc /scannow from a dos prompt. this will restore any corrupt files if needed. you need to be an administrator to do this. Of course this will remove the updates that u have installed and you wil have to redo the updates"
You really have nothing to lose...the system is obviously very, very corrupted. You have been working at a really disadvantaged position from the beginning, not being able to even get online. Obviously multiple viruses and trojans. That was shown even after all the manual removals and finally the Kaspersky scan showing even more than we first realized.
I am so darned "ticked" I could spit and I know you feel the same too.

I wonder if the Norton Anti-virus program worked at all, especially seeing those infected emails that Kaspersky found that were nearly 2 years old.
If it were me, I would go ahead and try the possible solution you have found. I found that also and was hesitant to suggest it seeing as my suggestions have evidently taken you to the brink of destruction.
Try it and see...I swear I will also keep looking.
Judy