Whenever I open up FireFox for the first time, or click on a picture that then tries to open in a separate window, these errors pop up:

A black DOS box pops up with a flashing cursor in it. The blue header bar on the top reads:
"C:\DOCUME~1\ADMINI~1\APPLIC~1\Mozilla\Firefox\Pro files\LRAI2E~1.DEF\EXTENS~1\{A50B1~1\RSINST~1.exe"

Then an error message pops up and reads:

"16 bit MS-DOS Subsystem" (...In the top blue bar)

C:\DOCUME~1\ADMINI~1\APPLIC~1\Mozilla\Firefox\Prof iles\LRAI2E~1.DEF\EXTENS~1\{A50B1~1\RSINST~1.exe
The NTVDM CPU has encountered an illegal instruction.
CS:0dd3 IP:046e OP:63 74 6f 72 2e Chose 'Close' to terminate the application.

And of course it has two buttons, 'Close' and 'Ignore'.

It sometimes also then gives me some kind of print error dialog box.

FireFox Version: Mozilla/5.0 (Windows; U; Windows NT 5.0; en-US; rv:1.8.1.16) Gecko/20080702 Firefox/2.0.0.16

Microsoft Windows 2000 5.00.2195 Service Pack 4.
It cut off my error! You can see it in image form here: http://i14.photobucket.com/albums/a302/AiXeLsyD13/WERIDERROR.jpg

Any help would be greatly appreciated!
f I uninstall/reinstall, will all my customizations still be there?

Get Firefox 3.0.1

Uninstall/reinstall. Your profile should still be on your PC when you reinstall. To be safe though, use the app linked below to back-up your profile.
I assume that you have an older version of FF because you don't like FF3. Understandable. However, if you haven't tried FF3 yet, you can follow the 2nd link.

MAJOR UPDATE!!
WOW. I didn't expect this question to get so complicated...

After reviewing the error message, I have reached 2 possible conclusions. One is it may be an error of somekind IN your profile(I base this on the path mentioned in the message). In this case, I would backup your profile with MozBackup, then uninstall FF & delete your profile(instructions follow 3rd link). If problem is gone upon reinstall, the the problem was indeed the profile.

OR it looks like you may have the virus called SmitFraud. I searched the specific term "CS:0dd3" from your error message and got results matching posts concerning SmitFraud. The last 2 links are resolutions to this issue, if it happens to be the case.