Error "a disk read error occurred" on Windows XP

Solution 1:

The utility SpinRite contains unique technology that can resuscitate bad hard disk sectors. It costs $89 but comes with Satisfaction Guaranteed refund. I've personally used it to save hard disks that subsequently worked for years afterward. From the web page:

SpinRite v6.0 recognizes and operates on ALL file systems. It can even be used to repair and recover Apple Macintosh and Tivo hard drives by temporarily moving them into an Intel-based PC. It can also be used to check the health of drives that have not yet been formatted.

Solution 2:

Given that your virus scanner found a suspectible file and the sudden occurence of your problems, I assume it's a virus

Try booting the computer into save mode and move all the files to a backup/alternative drive. Make sure to scan the files for viruses later on, though I might be paranoid suggesting it.

Then simply reinstall the OS. If you want to backup your settings, use EasyTransfer. Other things to prepare reinstalling are the most important drivers and applications you want, but if you have to download them: use the alternative OS or your GF's netbook.

Have a look at this question if you need more tips on cleaning up an infected computer.