The factory reset was the best option, we could have chased our tails forever. OK as you`ve done the reset you will need to update to SP3 and IE8 at your earliest convenience. I gave you links/instructions previously, if you need them again let me know.
Regarding your connection do this:
Select start > run > in the box type services.msc
> in the new window scroll to "Wireless Zero Configuration"
that service Status
should be "Started" and Start up type
should be "Automatic"
If that is not true right click on the entry, select "properties" in the new window make the changes, apply and ok it.....
Did that help?
Secunia is the best tool to check for outdated apps etc.... Personal Software Inspector option (PSI) or Online Software Inspector (OSI) can be d/l from here http://secunia.com/vulnerability_scanning/personal/
choose the option that best suites your needs..
What about security, are you ok on that front or do you need any help. I can give links for a freebie set up if required....