Thanks again for the help Owen - I have now installed Spybot (and running a scan now). Along with that I already have Norton AV and Personal Firewall, and will be getting Ad Aware Personal SE later on to complete my set up.

How often do you recommend using Windows Update? Currently I do it once a month - is this enough?

Once a month should do. I don't usually check Windows Update. I am subscribed to MS Security Bulletins here. I receive notifications of new Critical Security Patches.