Help! My Dell is extremely slow now

I'd also try Microsoft's AntiSpyWare product, though it sounds like you've done everything I'd think of to rule out mal-ware. Not all mal-ware is captured by one of the above programs, though, so it's possible you have something new.

SP2 will not make your machine faster, though it may make it more secure. You want to do this, but not till after you solve your problem, and not without a good backup.

I'd also look at the Task Manager to see what's using CPU time and memory (control-alt-delete, Task Manager, Processes, View, Select Collumns, check CPU Time, OK).

A half-full 120G drive isn't the problem, though as Jerry said I'd check the transfer mode of the drive. Tom's suggestion to rebuild the OS would definitely narrow it down to hardware or software, though you might want to run some diags first to rule out hardware.