I had the same issue on a friends Dell XP computer I was trying to fix.
(Website found, waiting for reply)
I had thought my issue was firewall based. But Firefox worked fine.
I tried disabling active services but that did not help
I tried reinstalling IE 6 (
http://support.microsoft.com/kb/318378 )
I tried reinstalling SP2
I tried upgrading to IE 7
I tried other minor fruitless en devours
(all of this with reboots at each significant step)
What I did do that had worked for me
Uninstalled IE 7
Uninstalled SP2 (with many warnings things may not work after)
Reinstalled SP2, Success!
I haven't reinstalled IE 7 as of yet, I wouldn't expect any issues in doing
so. But I must check with the owner if they want me to first.
So to sum up my experience, it seems that SP2 was the issue, and doing a
reinstall was not enough. I needed to be uninstalled first then reinstalled.
Hope this helps someone out there.
Mike