I am not surprised at all when I hear about issues with IE7.
I installed it and removed it in 3 minutes from my computer. It has a lot of bad issues, of which the speed is the most disturbing. I am pretty sure that your problem is also related to the Windows updates. I've recently had some of the difficulties you describe but with other websites (not Moodle). What makes me think it's related to the updates is the fact that it's doing the same in IE6, which shouldn't be happening.
I don't know yet what you could do (besides setting IE not to check for new page content), but hopefully we'll find out soon.
The bottom line for me is that at the moment IE7 is a VERY poor browser.
Ah.. one thing you could do, is opening the page from Firefox, with the IE tab extension's rendering engine - https://addons.mozilla.org/firefox/1419/
I hope this is helpful.