Aside from the the OS software being infected, the Format on your HDD could also be slipping.    When was the last time you Defragmented your Hard Drive?  When files are defragmented, a computer need to spend time spinning the disk to find each part, and that's casue for heat and wear.

To my experience Ant-Spyware works much better as a deterent than a fix.   Once your machine shows symptoms that's it.  I've never been satisfied with a machines performance after it's been infected, regardless of what anti-spyware, or registry clean I then install to clean up the mess.   Maybe, because re-install works so much liek a like a charm, for restoring system performance.

You right about your Window Programs and Settings they will all be lost.  I bet you could make a Ghost of your current disk(With OS included,) and restore with that after an OS re-Install, but I doubt it would be easy, or very inexpensive.  Nor would tha guarentee the infected files would be removed.

I do know Windows comes with a utility to transfer Programs etc from an old PC to a new.  Do you have a second PC lying around?.  Else, you may think of grabbing a $50 Cheapo Desktop from eBay.  Then you could make the transfers; re-install the OS on the Good PC, and transfer everything back?

Safe Mode is'nt anywhere you want to run your PC from.  You only find yourself there in an Emergency.  It's there to just give you access to files, you need to backup, and then an easy avenue to an OS re-Install(No BIOS)  You ca'nt Add/Remove programs(Registry), the Video Display is crippled, and probably some other stuff.  My guess is if you go on using your PC, from there, it too will eventually crash, and then not give you a backdoor to your files.  In other words do'nt think of using your Safe Mode on a dialy basis!

My suggestion is to bite the bullet this time, and then next time learn to live with OS re-install, and reorganize your workflow to to deal with it(i.e. extra drives and partitions)  Or get your hands on another PC.  I never throw my Setup files away, they're backed up into each install directory, across my Application Files drives, on DVD-R after DVD-R, and on XDrive(In case the house blows up!)