I agree, your problem does seem to have reached the advanced stages and is severe. There is 1 other virus/spyware/malware removal method that is a bit advanced I use at work. If you do not care about losing any data you have on your computer then just skip down to the last paragraph.
What I do is open up the computer case, remove the hard drive and place it into what is called an External Enclosure. Here is the one I use at work
http://www.amazon.com/Vantec-Nst-360U2-Bl-Nexstar-External-Enclosure/dp/B0009HMT9Y/ref=pd_bbs_sr_2?ie=UTF8&s=electronics&qid=1235604348&sr=8-2With the enclosure it will be recognized similar to a portable USB stick. You can plug it into any Windows XP or Vista computer. I recommend plugging it to a computer that has Kaspersky or nod32 installed and performing a Full/Thorough scan. Then backing up any valuable data to that computer. After the scan is complete reinstall the hard drive back in your case/computer. See if it starts up correctly. If it does not then you will have to perform a complete system recovery.
Worst case scenario is that you have to perform a full system recovery. You will lose any/all data you have on your computer. The good news is that after the full system recover your computer will be like brand new again, as fast as the day you purchased it. To perform a full recovery you must use the original manufacturer’s recovery discs that came with your computer. Sometimes by just pressing one of the, “F” keys it will perform it automatically without any disks (all the data is stored in a hidden space on your hard drive). Whatever your brand is, visit the manufacturer’s website and search for the manual. It will tell you the exact recovery procedures. If you lost your recovery discs most manufacturer’s offer then online for a small fee.
If the computer was custom built you need to use a Windows XP CD. Install Windows XP again using that.