Agree with Microsoft Security Essentials. I
was using AVG but later versions are becoming increasingly more bloated, they're making it harder to
not install the stupid AVG search toolbar, and harder to just install the free version.
The "scan" while downloading isn't MSE or some built-in antivirus. It's likely Windows Defender, which on Win7 is for spyware only, not antivirus. Install the real deal. See here:
http://answers.microsoft.com/en-us/p...f-0dcedb9ab9fd
For backup, as you've discovered, there is a built-in one. But I've also used Clonezilla and on my wife's computer EaseUS Todo Backup. Very intuitive and easy. And free.
Yes, I'd always have the firewall on.
Assuming this computer is connected to the internet?