firstly I'm glad I found this forum because I happen to be another one suffering from this problem.
Firstly, I have checked my hosts file but it seems clean, there's nothing else apart from "localhost" line, so it has nothing to do with hosts file in my case, it seems.
I figured out some things about the way DNS service works and thought the reason could be slighly different.
I did manage to get the Ad Aware 2008 update via my mobile phone (happy I have a flat-rate internet plan on my N95) and then transfered it to my PC via USB, so at least my Ad Aware is now up to date. I scanned my PC thoroughly and fixed the infections but this didn't seem to help - I still can't open some websites and do online updates to Ad Aware and AVG anti spyware (i.e. the two anti-spyware programs I use).
There's one thing though. When I scan it with Ad Aware it finds this:http://farm4.static....54466b7c1_o.jpg
I scanned it a number of times and choose "remove" option but it seems to be coming back every time. If you notice, in the end of the line it says "nameserverdata 126.96.36.199" which, I assume, is an address of some dodgy DNS server
I'm not sure but I guess the malware somehow "redirects" my browser to specific DNS server (?) instead of using my default DNS settings which are on the router.
Problem is that Ad Aware cannot get rid of it, even though it can find it and I can remove it. It simply re-appears again during a next scan even if I do it straight away.
Edited by jo'man, 23 November 2008 - 11:49 PM.