sounds like your connection is timing out with out going over how to use regedit to fix this and maybe causing more problems...
I think IE7 caused the problem, have you tried using System Restore back to a time with the machine was working correctly?
if you can't dp that try downloading the WinsockXPFix tool to your desktop from the link below... and once it's there, run it.
http://www.iup.edu/house/resnet/winfix.shtm
Hope this helps.