It's much easier. You got the new Serflog.A (a.k.a.
W32/Crog.worm) virus (formatsys.exe and msmbw.exe are part of it).
Download the removal tool by
Symantec:
http://securityresponse.symantec.com/avcenter/FixSflog.exe
MIRROR (if the virus disabled that site):
http://www.virushelp.nl/download/fixsflog.exe
Edit:
I'm reading the symantec site about the virus and it's pretty nasty
. It does exactly the things you said: It terminates all sorts of anti virus and anti spyware programs and processes and it adds serveral file to your hosts file
.
More info