Well, I've never had a computer virus and all I've ever used is AVG
(the free version) for Anti-Virus backed up by BOTH Ad-Aware
and "Spybot - Search & Destroy" to deal with "Malware" & "advertising trackers"
I wonder why anyone would say anything bad about AVG unless they are pushing something else....
I can say a few bad things about AVG myself, but it's more situational. Upgraded my sister's system to xp from 2000 and of course that version of AVG wouldn't run on the XP system. The xp version would not upgrade because it kept wanting to run the 2000 version to uninstall which would not run because of the version incompatibility. Other similar problems have cropped up. So there is my bias.
Spybot has some issues with protecting you from cookies, including some you want to use and can be a pain, but I still kinda like it.
As for my preference for an AV program, Microsoft Security Essentials. It's free, fairly fast, fairly lightweight in resources and the current installation footprint for me is 14mb.
As someone stated earlier, just upgrading your OS and software is not going to fix underlying problems. THink of it as spraying a nice paint job over rusty metal. It might look nice, but the problem is still going to be there eating away at the core until it's fixed.
What I would suggest with my 30 odd years as a programmer is:
1) Backup all your personal information. Get yourself a 4gb usb thumb drive and copy your assorted stuff there. A thumb drive is generally cheap and works well to backup your personal information. With an 80gb drive, usually a user only uses about 5-10% of the space for "irreplaceable" files. So 1 or 2 of those 4gb thumb drives should cover you. Check Staples or one of the various office supply stores weekly ads o find a good price.
2) Once you've backed up all your files, make SURE you've backed them up.
3) Using a system restore disc, do the system restore to wipe your machine back to factory condition.
4) Now, from the estimation of your machine, you will get *best* performance from windows xp. However, windows 7 will be a nice upgrade if you can score yourself a copy, either through school or other means. Do not go for a pirated version. I've used them on occasion when I was younger and less able to get the latest and greatest and the hassle and risks of someone planting a rootkit or virus into the pirated version is getting greater all the time and really not worth it if you can at all help it. Stick with legit.
5) The first thing you need to do after restoring is to go into the control panel and then add/remove programs and look through the list of pre-installed applications and making sure that it is not something you use (or is required for functionality such as audio software, trackpad software, ect) uninstall everything you do not use.
6) Once you've done that, your machine should be working faster than you've ever seen it run. Now, if you go the Windows 7 route, it's fairly self-explainatory to install and you will be at a good point to pick yourself up an external backup drive and make a backup so if you need to do this in the future, you're at a good starting point.
7) Install your AV program of choice. Plenty of free options such as Microsoft Sercurity Essentials, AVG, CLAM, and others. You can also pick up a copy of Norton Antivirus for fairly cheap from the office supply chains.
8) Once you've installed the anti-virus and any assorted updates needed by the operating system, you are ready to copy your files from the thumb drive back to your main machine and resume your computing life.
At least, that is my take on the best course of action.