Could be a virus, it could just be other borked things with the system though.
Before going further is this the only security program you have installed?
Check the Windows event log and find out why Security Essentials is failing to start.
Also look in the event log for any other errors or strange events.
What I'd recommend doing
1) Download AVG free antivirus
2) Uninstall Security Essentials
4) Install, update, and run AVG
5) If no Virus found, presume you don't have a virus.
6) Remove AVG
(run system temporarily without any antivirus)
7) Check DNS settings in case they have been changed
8) Check HOSTS file in c:\windows\system32\drivers\etc - open in notepad and make sure it's fairly empty
9) Delete temporary files
10) Update IE to IE8.
11) Uninstall any unnecessary/suspect programs
12) go into msconfig > startup tab > uncheck anything suspect
13) Restart computer
14) Try running Windows Update again, download the entire lot
15) If no joy, post here, post the results of a Hijack this! file here / If seems OK, reinstall security essentials
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