Sygate is a great tool, but if you haven't configured it yes you will block everything.. thats what firewalls do
First thing you can do to make sure its the firewall causing the problem is you can right click the icon in your system tray and say ALLOW ALL.. which does I'm pretty sure you can guess.. allows all internet traffic.
If you can now access all resources you have to figure out the culprit.
You can look at the sygate application and see what applications that require net access are running.
AOL maybe a bit of a pain cause lord knows what they require. You'll definately require their AOL application to run and of course internet exploder.. from there if it still doesn't work come back and we'll see what we can do
I've never used regmech so can't comment on that.
For backups you can manually copy files to cd using any cd writer software..
MS has a backup prog that comes with the OS, but not sure if they included it in XP Home (It would be in start --> program --> accessories.. ) except now that I Think about it... not sure if you can backup to cd with it.
If you want to save an exact replica of your machine off somewhere you can use Norton Ghost.
With that if your system was to crash you can literally go right back where you left off without having to reinstall everything
The problem wth Ghost is... its not free