I have an XP home system that had spyware (now clean) that will browse the web in Safe Mode (with networking), but fails on all attempts in normal mode. Tried installing Firefox to get around problem, but same deal. Reinstalled XP2, but no help. Virus scans are clean. Any ideas?

Could be spyware or malware running causing this problem.
Please follow all of Owen's instructions HERE once you have completed that post your log on the Spyware, Adware and Viruses board

Spybot, SpySweeper and HiJackThis were all run today. Cleaned things with each, and the cleaned things are not reappearing. Turned off system restore. It may be a result of spyware, but the problem existed before the through cleaning I gave it, and it is still here. Seems more of anenvironmental issue, as a new install of Firefox is showing the same behavior.

have you tryed re-installing the modem??