LOG ON LOG OFF LOOP

Hello,
My problem started when my kid got a virus by visting a blog, she became frightened by the pop ups and shut down the computer....and its been hell ever since. Upon re booting the comp I noticed right about my Malware Bytes was disabled, so was the task manager,regedit, and the restart (ony can manually shut down). And the desktop had a message saying "you are infected." I tried to get into safe mode and it would only show BSOD. However I could get into mscofig and in the startup I saw something called winupdate86 and I knew that was not supposed to be there so I unchecked it and restarted (turned comp off manually). Thats when I got the log on log off loop. My desktop was blank no icons just my wallpaper *blank stare* then it would log me off and says saving user settings. Ive been reading about trying to get the xp disc and try to restore but I can only find a disc that I burned from someone thats says windows xp plus (i have home edition) dont know if that will work, or what to do first. I know a little about computers but this has me losing sleep @ night...*tears* :-P

Please help!!