This virus wont letting me open taskmanager or any other program using which i can kill it.
It was even not allowing to open regedit.

I did following:-
Made one bootable CD , you can even use bootable floppy disk.

Some how i managed to find that this virus uses blocker.dll to stop all the crucial programs.

so run your bootable CD, select the recovery mode.

go into directory using command prompt
and type
C:\Windows\System32\del blocker.dll
this will delete that dll now you reboot your machine after taking out the CD and you willbe able to open taskmanager now kill setup2.exe and also remove it from registry and C:\WIndows\System32\

there will be multiple copies of this exe may present in your machine, you need to lookin into registry , in my case i found it in C:\Windows\Temp by temp_0229900.exe name. remove such file as well.

Good luck.

Open system32, it shows you the route to take, and have both windows open. End the MicrosoftR in the window, not by the task manager, but the end process button. This done you can compress the application through the advanced properties (right-click), then delete it. It is locked by your computer before this.

Ending the process stops it from annoying you, compressing and deleting gets rid of its program.

Thank you greatly for the advice, I got it an hour later though.