When writing that last post, I searched for svchost (before deciding to link to Larry's comment), and got these Sponsored Links:
I'd be pretty dubious about using any piece of anti-spyware software that flagged svchost.exe itself as being spyware - it's just a shell. However, various keyloggers and other trojans might be installed into that shell. As always, they can't do this unless you're running as an administrator (or you've changed the ACLs on the keys).
You do need to use your head when reading anti-spyware reports. I ran Ad-Aware a couple of days ago, and all it reported was my use of about:blank as my start page (Lavasoft: about: is a genuine protocol) and a bunch of innocuous cookies.
Edit: After a number of comments about different permutations of the name and mass-mailer worms using the actual name but in a different directory, I feel I should point out that viruses (true file-infecting viruses) can infect any binary. What I was trying to point to in this post is that the advert baldly says 'Svchost.exe is Spyware'. That goes too far.