if you do not have a second browser on that pc I would put one on there asap, should your IE become non-functional you would have no ability to get online, it is always a good idea to have at least 2 browsers on every pc. I use and recommend firefox. You may find you like firefox much better, there are many great add-ons for it. Here is a link that might be useful: firefox

as you can see from this old article they have had issues with compatibility with the 2 from the beginning Microsoft Resolves Windows Live Mail, IE8 Conflict however is was supposed to be resolved. Have you done all of the IE8 updates and have the latest version of it? Would also suggest you try it with Ie blocking all of the add ons to see if one may cause a conflict To do this click Start -> All Programs -> Accessories -> System Tools -> Internet Explorer (No Add-ons).

should not make any difference the service pack. Many computers simply could not install sp3 but if you have done all windows updates you pretty much have the biggest part of sp3 from those regular updates. I would try to power down and power up in sequence to see if that helps. power off to everything, computers, modem, router, everything connected. Let sit 5 mins, then power up in this order modem first let it get fully lit up, power up router let it get fully lit up, power up computers let them fully load till all activity has stopped then try it. Do you have a firewall on it? if so it could be something in the firewall settings, but if the power sequence does not work I would just try a quick system restore to the date when it was all working fine that may reset what ever got changed.

browser history is just that, what you have accessed using your browser and nothing else, so when you clear browser history that is all you are clearing, to get it to clear history on close you do have to x out and close your Internet Explorer which has no connection to still being connected via your router connection, when you x out and close your browser that resets the browser and clears your history and what ever else you have it set to clean upon closing. any other programs you may be concerned with having a history would be totally independent of the browser and would have to be handled through that program. When you power down your pc and cut power then you are fully disconnected from the internet and no programs can have access. so there is a difference in powering down the pc and turning off your browser in your case IE, you can clear IE history and cache from either the tools menu on the top of IE or in control panel under internet options. Using a program like ATF will do a much better job of clearing all the history and cache and stuff you want cleared. ATF-Cleaner directions are on the page