svchost.exe file in the /windows directory not system32

Just because your scanners are showing clean doesn't necessarily mean you are free of a virus. There are different categories of viruses, some more stubborn/harder to remove then others. A rootkit is one of the harder ones to remove (in most cases) & even if you do manage clear most of it, there's always a chance that some remnant of it may cause problems down the road, or even reinstall itself at some point. Not to mention the damage that was probably caused to some of your operating system files, which will need to be repaired.

Rootkit detection is difficult because a rootkit may be able to subvert the software that is intended to find it. Removal can be complicated or practically impossible, especially in cases where the rootkit resides in the kernel; re-installation of the operating system may be the only available solution to the problem.

Being that Microsoft recommends a reinstall when it comes to this virus, this remains your best bet.

Back up your files on the medium of your choice and make sure they are thoroughly scanned before putting them back on the system. If in doubt, you can submit files (up to 32MB) to VirusTotal, which will scan the files with multiple AV programs.

https://www.virustotal.com/

Another thing you may wish to do, after you have done a reinstall (do not do this now), is to make a system image. This can be invaluable should something like this happen down the road:

Backup Complete Computer - Create an Image Backup

Please read about ZeroAcess and what it does, here ZeroAccess Rootkit Guards Itself with a Tripwire « Webroot Threat Blog

Borg,
I agree. Only an offline malware removal tool such as Microsoft's offline malware removal tool, WDO, will catch many problems.

Incidentally, I disagree with Jaycee's advice, but that is another topic and I'm in no mood for such discussions.

My advice is to wipe the OS and do a 'clean' install. Once you have a Rootkit, your computer has been severely compromised and it will never be stable again.... unless you do what I just said.

The article above, that I linked to, tells what ZA Rootkit does and how it acts to render your computer worthless.

I disagree. Not all rootkits are created equal. True, there are some that do irreparable damage to your system files, however, most people would like to avoid a reinstall like the plague if at all possible. I give them a possibility that works in an amazing number of cases.

Nope, not all Rootkits are created equal... this one creates it's own hidden partition that is just about impossible to find, let alone clean up.

Karl, did you read what ZA is and does? Would you allow it to be "fixed" on one of your own computers, or wipe and 'clean install' the OS?

I use, and use only MSE, Microsoft Security Essentials.

This will help explain why:
Understanding Microsoft Anti-Malware Software 2012 ~ Security Garden