Disconnected laptop from network and it is still occurring. So it isn't a trojan. Tried Sophos Evaluation version and it did not detect anything. Tried online virus scan (Housecall) and it did not detect anything. I also tried AVG 6.0 Free Edition and it also did not detect anything. I ran one more scan with Norton for good measure - still nothing. Regional settings and keyboard settings are all good as well. Couldn't find macros in Outlook Express so not sure what is happening there.

It really is quite an odd thing, I have seen it happen on several more occasions since I posted it here. Sometimes it turns caps lock on, sometimes it goes to the drop-down menu in the new message box. Anyways, since I can't fix it, I will have to format - thanks a heap for all your trouble people, it is much appreciated

-toad