You are partly right with b, and definitely c. The executable file is created by the W32/Opaserv-B virus (and possibly other variants). For more information, see Sophos.com here for more detail of the objectionable little horror.

First step you need to take is to get a good anti-virus solution - Norton, Panda, McAfee and Kaspersky Labs are all reputable - Sophos aims at the business market.

Hope this helps!