This log looks really good. Just a few things to fix and a few unnecessary auto start items and you should be good to go.
#1...Where is your firewall? You absolutely need a firewall. Either use the built in Windows XP firewall OR download and install one of the free ones noted in PROTECT YOURSELF FROM MALWARE: Tools & Tips
Just be certain you get ONE and enable it.

#2...You do have several programs which are running all the time from auto-start which are totally unnecessary and can easily be run manually if you need them. To disable them please download Mike Lin's StartUpControl Panel
Once you have downloaded it you will find it located in the Control Panel, designated by an Icon which looks like a computer and says Start Up.
Double click that icon and the program will open.
Go through each Tab and look for the following items and when you find them remove the checkmark next to it. Once you have removed all the checkmarks then close the program, reboot the computer.
These are the programs which need not run at start up;

Update Manager sgtray.exe; StorageGuard from Veritas (this version by Sonic). Free utility that integrates with Backup MyPC (formerly Backup Exec Desktop), Simple Backup and MS Backup. Provides system tray access and background monitoring - warning you of files that haven't recently been backed up. Required unless you backup manually on a regular basis or have scheduled backups. This one is up to you. It isn't necessary unless you want these reminders.
TkBellExe; Application Scheduler installed along with RealOne Player. Once installed, it runs independently of RealOne Player. Not required
Reminder - HP-specific program that reminds users to create System Recovery CDs. Once they use the Recovery CD Creator (Start -> PC Help & Tools -> Recovery CD Creator) to make the recovery CDs the entry will remove itself from the startup list(You actually probably should go ahead and make those recovery CD's and then you will have them should you ever need to recover the computer again...hopefully you will not.
mmtask.exe; Part of MusicMatch Jukebox - digital music player / CD burner and ripper / music organizer / playlist creator can easily be run manually. It is advised that you disable this program so that it does not take up necessary resources.
AlcxMonitor; Realtek AC97 Audio - Event Monitor. Sypware file used surreptitiously monitor one's actions. This file has been identified as a program that is undesirable to have running on your computer. This consists of programs that are misleading, harmful, or undesirable.
QuickTime Task; System Tray access to Apple's "Quick Time" viewer from version 5 onwards. It is advised that you disable this program so that it does not take up necessary resources.
MSMSGS; Windows Messenger utility. If you don't use Windows Messenger, this can be annoying. This is NOT MSN Messenger.
Adobe Reader Speed Launch; supposedly will speed up the launching of Adobe Reader, maybe by a few seconds at most. Can easily be started manually if needed.
Compaq Connections; this is that item that keeps showing on the Kaspersky scan. If you can disable it via Mike Lin's StartUp Control Panel then go ahead.
Quicken Scheduled Updates; update scheduler for Quicken program. These can easily be done manually. It is advised that you disable this program so that it does not take up necessary resources.
Those items above are the ones to disable via the Mike Lin program.
Once you have removed the checkmarks then reboot the computer.

#3. Run a new HJT scan and place a checkmark next to the following entries if they still remain;

O2 - BHO: (no name) - {549B5CA7-4A86-11D7-A4DF-000874180BB3} - (no file)
O2 - BHO: (no name) - {FDD3B846-8D59-4ffb-8758-209B6AD74ACC} - (no file)

O4 - HKLM\..\Run: [UpdateManager] "C:\Program Files\Common Files\Sonic\Update Manager\" /r
O4 - HKLM\..\Run: [TkBellExe] "C:\Program Files\Common Files\Real\Update_OB\realsched.exe" -osboot
O4 - HKLM\..\Run: [mmtask] C:\Program Files\MUSICMATCH\MUSICMATCH Jukebox\mmtask.exe
O4 - HKLM\..\Run: [AlcxMonitor] ALCXMNTR.EXE
O4 - HKLM\..\Run: [QuickTime Task] "C:\Program Files\QuickTime\QTTask.exe" -atboottime
O4 - HKCU\..\Run: [MSMSGS] "C:\Program Files\Messenger\MSMSGS.EXE" /background
O4 - Global Startup: Adobe Reader Speed Launch.lnk = C:\Program Files\Adobe\Acrobat 7.0\Reader\reader_sl.exe
O4 - Global Startup: Compaq Connections.lnk = C:\Program Files\Compaq Connections\1940576\Program\BackWeb-1940576.exe
O4 - Global Startup: Quicken Scheduled Updates.lnk = C:\Program Files\Quicken\bagent.exe
Once you have placed the checkmarks then click the Fix Checked button.
Exit HJT.
Reboot the computer.

#4. Now I again recommend that you go to the link PROTECT YOURSELF FROM MALWARE: Tools & Tips
and follow the instructions there. At the very least you need a firewall, SpywareBlaster and enable all protection including Restricted Sites and SpyBot Search & Destroy on the computer and be sure to use the Immunize feature on SpyBot and update and do weekly scans with it.

#5. Also, since so much work was done and you have had to use so many scans and removal tools AND had to do a recovery I would recommend that you defrag your computer. Rather than using the built in Windows Defrag program we usually recommend that people use this super, fast and free Auslogic Disk Defrag program.

#6. Once you have done all of the above then right click My Computer. Choose Properties, System Restore and re-enable System Restore.
Hopefully all will run smoothly from now on....KEEP THIS SYSTEM UPDATED with, at the very least, the Critical Updates from Windows. Keep the Java updated along with all the new security programs you now have...Spybot, your anti-virus program, update SpywareBlaster and AVG Anti-spy. Do weekly scans with all of the above and you should be good to go!
If you feel all problems have been solved then I can mark this thread as Resolved, so let me know.
Judy