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Microsoft Corp. has issued a hotfix for Windows XP Service Pack 2 to solve a problem about which many users have complained: programs that attempt to connect to loopback addresses other than get error messages.

The problem—one of several that have appeared in the newly released SP 2—has been reported by many VPN users since Microsoft introduced the second release candidate in June. However, since it is a hotfix, it is not fully supported. It is expected that Microsoft will issue a more permanent fix in the future.

Meanwhile, security researchers are reporting a new vulnerability in SP2 that could allow a malicious Web site to deposit an attack program on a user’s system.

The attack utilizes Internet Explorer’s drag-and-drop features and the Windows “shell folders” to copy an executable from a malicious Web site to a user’s startup folder, from which it would execute the next time the user logged on. The researcher who reported the problem to security mailing lists provided proof-of-concept code that leaves a file named “malware.exe” in the user’s startup folder.

Click here to read more about Internet Explorer’s security woes.

The report was echoed by Secunia, a security consulting firm. Secunia asserts that the attack also works on a fully patched Windows XP Service Pack 1 system, and that the drag-and-drop approach could be replaced with a single click.

The vulnerability is related but not identical to a series of others patched by Microsoft in pre-SP2 versions of Windows. Those vulnerabilities allowed attackers to run code directly in the context of the shell folders and therefore the browser’s My Computer zone. This new attack simply writes a file in the shell folder.

For the attack to succeed, the user would have to visit a Web page that hosted it and follow the instructions. Any attack code deposited would be scanned by anti-virus software on the user’s computer.

Microsoft officials were not immediately available to comment on the reports.

Check out’s Security Center for the latest security news, reviews and analysis. And for insights on security coverage around the Web, take a look at Security Center Editor Larry Seltzer’s Weblog.

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