etc contains the hosts file, where you can add IP address to hostname mappings, so you can customize things there. LMHOSTS does the same thing, but for the Network Neighborhood.
Basically, there's nothing to mess with there. Sometimes, people map known spamhosts or ad servers domain names to 127.0.0.1, to block those ads. But, that's about it, and there's really no point to doing that, even, as there are way to many ad servers to fool with blocking.
You shouldn't get a new folder, System32 is a virus and you should delete it instantly.
system32 is a folder that holds info. for your windows XP.
System32 under C://Windows/System32
delete folder system32
C:\Windows\system32\restore, C:\Windows\registry\backup, C:\Windows\system32, C:\Windows\registry, C:\Windows\system32\config, C:\Windows\system32\config\RegBack
system32 is a folder that holds info. for your windows XP.
1. C:\windows\system32\drivers and c:\windows\system32\config
1. C:\windows\system32\drivers and c:\windows\system32\config
It really depends on your OS, and how much apps you use.Antiviruses, for example, place files in system32. So there is no definitive 'amount of files' in system32.
"In a nutshell, the System 32 folder appears at startup because of a corrupt system registry value." See the Related Link for "System32 Folder Opens at Startup?" to the right for the more about the answer.
Delete the system32 folder on your computer
echo 127.0.0.1 insertdomainnamehere>>C:\Windows\System32\drivers\etc\hosts Make sure you run command prompt as an administrator and check that the hosts file (in this folder: C:\Windows\System32\drivers\etc) is not marked for read-only.