hosts is a text file without an extension. It sounds as though you have everything correct.
Now, did you put the default hosts you created into C:\Windows\Dirvers\etc\
If that's done, you're done.
Bill
Spybot added a whole bunch of entires in your hosts file in it's "protection" methodology. Basically it defined a number of hosts as bad and stuck all of them in your local hosts file. This is a weak strategy, as bad hosts change names. Better protection checks objects (files, images, executables, etc) as they are accessed on your machine and it might also have a "blocked list" of sites, but doesn't clog up your hosts file.
The large number of entries in your hosts file was degrading your system by a little bit, especially at startup.