background clutter on wallpaper

Zen Media, who said the problem was that the wallpaper had been infected

That makes no sense, and the host that thinks it does sucks. What has happened is that either template files in you theme folder the permissions were to high which allow someone to edit them or the hacker gained entry through somewhere else on your host server and traversed to that folder. First you need to fix this.
<meta content="WordPress 2.0.7" name="generator"/>
That version of wordpress is extremely old, you need to update. Then the eaiset way to get rid of that stuff is to download your theme again and delete the old one and upload the new one. Also make sure to read this.