Monitor display distortion - computer help forum

Hi friends,

Last night, I copied few files from a friends potable HDD. My system was on through out the night as some D/Ls were running. In morning, I found that the display had frozen. I did a restart and as the display came up with the initial config details, the display got a little distorted. And by the time windows booted up, the whole screen got distorted and the system hanged.
I tried again and this time the distortion started when Windows XP logo comes up and again the computer restarted.
Now, i went restarted the system in safe mode and the display came up fine this time, but the mouse clicks seem to leave a trail which should normally be wiped out automatically. But nothing as severe as what i saw during normal bootup.
I am really confused as what exactly is the nature or I am facing both a monitor hardware and a virus issue at the same time:
1) System works in safe mode means virus is a possibility.
2) Monitor freeze means monitor issue but it should not resulte in a system restart which points to bad RAM or again a virus.
3) In safe mode, mouse seems to leave a trail. Monitor refresh rate is impacted but how?

Please advice if any of you faced similar issue and fixed it. It will be of great help. Thanks in advance.