Oh my, I was under the impression that you had already gone the spyware route. This happens to be an area of particular familiarity for me. Honestly, I seriously doubt that you need to format and reinstall windows. I have deliberately trashed several windows installations and have yet to have to reinstall.
As for the spyware, this is probably the most common problem facing internet users today. You need to obtain spybot if you cannot access the net with the broken PC, you can and need to get the available updates along with the actual program. At the Kolla page, there are a bunch of downloads. Look at them carefully and get the ones you need. Run it.
Another great tool you want to get is HijackThis. You will want to get this and scan your computer. Take the log that is produced and find one of many sites that have Guru's that can anylize it for you. This will show someone that knows what they are looking at everything needed to figure out nearly every IE related problem. The repairs are manual, but with some basic instruction, pretty easy to do.
Lastly, if you can get this box onto the net, you would want to try out Bazooka spyware blaster. It's very quick and finds some rather obscure bugs. Also manual removal, but it gives you the instructions itself. Rather comprehensive ones at that.
drop me a private message if you need more info