Trojan.Download virus is easy to get rid of.
It does however, call out to the Internet to download more crap onto your PC.
For Win ME & XP (don't know about 2000), you have to disable system restore, start PC in safe mode & run Norton. Delete all files found (winfavourites.exe I think), then Update via the Internet and run it again.
Re-enable system restore, then check for the crap it loaded onto your PC. It will be spyware, pop-up's and possibly keylogger programs. Fortunately, a free program will get all of these, 'Spybot Search & Destroy'.
You will have to run the program in safe mode as some of the files will resist being deleted, and you may have to run Spybot a few times, restarting the PC and running it again (but it does work). Spybot can print out a report of the bugs it finds which help you check what the crap may do (e.g. a key logger may send your passwords to a remote E-mail address, so these may have to be changed).
It may be an idea to pull out the telephone/Internet plug from the socket to stop the Trojan from contacting the Internet while you clean up.
As for system 32 folder pop-up. Go into START - RUN - type MSCONFIG - OK - START UP.
You will see a box with a check in it next to system 32. Take the check out, click APPLY - OK. system 32 may be in there twice, uncheck both of them. On restarting, a message will show indicating you are starting in selective mode. You can ignore this, as it is telling you some of the start-up files have been disabled. You may have to do a bit more to clean your PC, but this is a start!
Post back if you are not sure of what I say.