Sorry about that... I've been out-of-pocket all day working on a high-priority software testing project.
Just FYI, another handy little shortcut to find out which service pack you have installed is by navigating through Start... Run... and typing "winver" within the "Open:" command.
Simo, I believe that Windows Defender is fairly adequate. Since you already have antivirus software, are utilizing a firewall, and are performing periodic scans with Ad-Adware, it's good to have proactive software like Defender (and you obviously can't beat the price). Ensure that you leave the automated scans on "Quick Scan" versus "Full Scan," though. The latter can be a bit of a system resource hog, particularly on older machines. If any of you out there are ever interested in taking your spyware/malware protection to the next level, an application called Primary Response SafeConnect 2.1 is the best I have seen thus far.
To the topic creator: utilizing passwords for each profile is a personal thing. If it's your personal machine in a relatively secure location, it may not be a big priority.
As far as the different profiles are concerned, I typically use my "limited" account for everyday functions on my home computers. Even if you're not on the Internet, it can help you avoid minor accidents with the operating system, and unless you're installing software or performing some type of system maintenance (defrag, etc.), it shouldn't really be necessary.
Hope that helps out a bit!