As per my earlier post, i've run spybot and adaware, and also in safe mode. They came up clean.

Also, how could the .bho file be hijacking me when it only contained: 127.0.0.1 localhost

Anyway, I deleted all the backups and restarted but no luck.

Now here's something I remember reading...that the Hosts file must be in upper case, i.e. HOSTS.
At the time I couldn't see how that would affect it, but now i look in the ETC folder, all the other files are upper case, but Hosts is not.