As far as a free antivirus, I usually recommend AVG. For a purchased one, I would recommend NOD32:
http://www.eset.com/
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Yes, remove Java 2 Runtime Environment, SE v1.4.2_03 and then follow the instructions for installing Java Runtime Environment (JRE) 6 Update 10. Just ignore the update notice.
You can change your homepage back if you want.
Let me know if your machine is still behaving OK.
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