Yeha, I got my first virus, advice? Options

[Team Black]

I can't clean or quarantine it, the only option is to delete it.

Before I do that though I want to ask the people here who are a little more computer savvy than me, just to be sure.

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[Clazzy]

and why would the milltary be using sucktastic anti-virus?

Probably because they don't run Windows on computers that are ACTUALLY important.

Delete the file permanently then reinstall IE7. You should be able to do that from Add/Remove programs. To be honest, it may only be stuff in the Windows folder but there's a feature where Windows will restore modified or deleted files to their former selves to protect the OS from idiot users. If you're lucky it'll have a backup of the file and Windows will restore the file by itself. If not, just reinstall. If it fails to reinstall, either download this version of IE (released by Google, so it comes preinstalled with the Google Toolbar) or read on.
To be brutally honest, you should really try and avoid IE, OE and Media Player since they're all fundamentally tied into the core computer. A vulnerability in any of them will result in the whole computer being vulnerable. I'm sure you've probably heard it enough, but use something like Firefox or Opera instead.