ie6/sp1 win98 stopped connecting to the internet

my ie6/sp1 on windows 98 stopped connecting (server not found) when it had
been working fine. i know i have an interet connection because my eudora gets
and sends email and AVG antivirus gets updates.

also at the same time my netscape stopped loading at all and when i try to
install firefox the install program just disapears. reinstalling netscape
disapears in the middle also.

i suspect some kind of malware. i have stopped the loading of everything at
startup and i makes no differenc. AVG finds nothing when it does a virus scan
and it was running when the problems started.

i noticed that the check for proxy server was there with nothing in the porxy
field and when unchecked it kept coming back untill i stopped all the programs
from loading at startup.

i have tried reinstalling ie6 and it gives the following error message in a
small window:

"windows update setup may have been unable to use your current proxy settings"

when i click on the advanced button in the error message an new message pops
up:

"please type the proxy server for your for your lan"

and "connect using a proxy server" is checked

address field has: http:localhost
port field has: 8080

i have erased the fields and unchecked the "connect using a proxy server" but
it still doesnt continue the install

hosts file is blank. i added "127.0.0.1 localhost" wich makes no difference

help

thanks
.