I've moved your post to the Install topic folder of the forum from the Update folder as your problems may have begun with the installation of OneCare.
It is possible that the problem is due to other conflicting security software remaining on the PC when OneCare was installed, as this can cause issues up to an including system instability. If there is other security software installed, remove it or remove OneCare.
You can remove OneCare via add/remove programs in Control Panel. You can also remove IE8 from the same place, which I would recommend until you can stabilize the system and determine what the cause of the problem might be.
If OneCare does not remove via the normal means, you can use the cleanup tool.
http://social.microsoft.com/forums/en-US/onecareinstallandactivate/thread/399071e2-49dc-4767-932d-d261e3965943/
As for the lack of Restore Points for System Restore, this can be due to many reasons. One would be that it is turned off, hence the lack of any points to return to. It may have been turned off by other security software or it may have been turned off by malware.
I can't comment on what is wrong with your Shockwave install, but I would suggest reinstalling that or updating it at www.adobe.com as OneCare should not have any effect on Shockwave.
If you need further help with OneCare or believe that your system problems are due to OneCare, please contact support.
How to reach support (FAQ) - http://social.microsoft.com/Forums/en-US/onecareinstallandactivate/thread/30400b52-7f26-4ba0-bc18-17e305329d90
-steve
Microsoft MVP Windows Live / Windows Live OneCare & Live Mesh Forum Moderator