1.) Infected system restore points could very well be why you cannot restore your system. Right-click My Computer, select Properties, select The System Restore tab, and disable System Restore on all drives. This will purge all restore points, thereby deleting the malware which cannot be removed using most antivirus software.
2.) With System Restore still disabled, run Ewdio and then the Webroot SpySweeper scanner. The Webroot scanner will not remove malware, but it will check-up on Ewido to make sure it got everything it should. Also make sure you run TrendMicro's online scanner HouseCall again afterwards.
3.) MS05-049 and the others refer to Microsoft vulnerability reports...known security flaws which should be patched. It doesn't make sense that HouseCall would identify them as things to be removed, but it may be detecting that you do not have the appropriate patches/updates installed.
4.) Based on the files you listed as being in quarantine you will need to click here to download/run Winsock XP Fix, which will repair your internet connection.
5.) Insert your Windows XP CD, go Start->Run, and then type in SFC /scannow (with the space). That will replace any corrupt or missing system files, another issue indicated by the quarantines list you gave.
6.) Download a fresh copy of Internet Explorer 7 and install it.
7.) To to Windows Update and download the latest releases.
8.) Go back into System Properties and re-enable System Restore.
There are several things that could go wrong, so if something does happen report back telling us what the last step was that you completed successfully and exactly what happened. It may take a little more work, but you can recover from this...just stick with it.
John
P.S. The likely cause of all of this is a malware infection which corrupted system files, thereby preventing Internet Explorer 7 from installing correctly, which complicated the issue a little bit.