I was only running xolox when I got a warning from my firewall as to whether or not to allow access from an application called something like "x^u^ou" and someone else had said on here that they got a java pop-up message saying something similar. Could this be the result of someone having found a way to hack using xolox?

there are several ways to get junk on your pc -- it might just as well be spyware that you got from some application -- have you run an updated virus scanner recently? have you run Ad-Aware?