Seems like your cherry has been popped!
Got your 7.0 Redhat ISO's handy?
GOT your bootable floppy?
If no to all of the above create a boot floppy from Either
RedHats's site or a TOM's root boot.
then boot from floppy (disconnect the stinkin nic cable)
and you'll need to reload each infected program
from the orginial CD's.
If your a true newbie maybe wiping completely and starting
over with RedHat 7.3 is a better suggestion.
Hopefully you'll run Secure shell in the future and not
Telnet. (telnet sends your username and password in
clear text for anybody to sniff). try www.openssh.org
instead. or load the Redhat ssh rpm.
You don't run most things as root do you?
You should run them as you (username) and only su to root,
Also think about installing Bastille. It hardens your OS for you.
Another program. www.bastille-linux.org
Also what about a firewall? gsheild maybe?
You can even make a hardware firewall out of junk look up LRP (linux router project) I run about ten of then for people!
do a "netstat -a |more" more often.
Also run "nmap" against your box to see what ports you have open.
All of the above programs are free.
And so is the advice.
Need more help, just email me or post it...