First issue.. virtual memory too low error message....
Their is confusion between HDD space, physical and virtual memory. HDD is storage, physical memory is work space, virtual memory is space on the hard drive when you run out of physical memory.

Virtual memory is also known as the swap file. When physical memory is filled windows will swap out parts of the applicatiions from physical to virtual memory.

Your error message indicates that windows is expanding the virtual memory size due to lack of physical memory.

Adding memory or closing unneeded applications will resolve this issue.

Second issue....
Webshot... I do not like any application that is in direct contact with my system .... as such I do not know this application.

losing the desktop icons may be....

1. Security updates and Webshots are having a conflict.
2. Spy-ware/virus -> scan system for -> see
3. XP has the ability to hide desktop icons.
Right click open area of desktop ->
Look under Arrange Icons by