OK,
Have now tried 3 different computers, 1 of which was a completely fresh installation of windows xp sp2.
The problem still exists, so now i'm thinking
a) My ISP has a problem.
b) I've contracted a virus which has somehow spread to all 3 computers on my home network.
I've called my ISP and they have opened a ticket for this. They'll call me back tomorrow. I called my telco and there is no fault on my line.
I've changed my mind about this being a virus - the three computers have not been on the network at the same time (because I was worried it it spreading). The newly installed box acts in the exact same way.
I haven't tried Firefox yet (i can't download it!) but i am VERY confident that I would have the same problem. It seems that all HTTP downloads suffer in the same way...