Upgrading from Vista to 7 probably caused this problem in the first place. In-place upgrades are notorious for being riddled with bugs and glitches that can only be resolved by a clean install.
So, I don't recommend going back to Vista, then upgrading to 7 again. You will likely experience the same problem again.
However, depending on how the manufacturer's Windows 7 disc is set up, you may or may not be able to do a clean install. See here: Clean Install with a Upgrade Windows 7 Version
Yes, you should keep IE8 up to date even if you don't use it. It is built into Windows 7, and is an open vulnerability if it stays unpatched.
I would recommend making a full system image backup inside Windows 7 before you do anything else. If you screw something up, you can always go back to that image.How to Create a System Image Backup in Windows 7
Edited by keyboardNinja, 25 May 2010 - 02:27 PM.