Thank you Caesar. I do believe after some thorough research that the problem I had today was a Microsoft issue. The bad emails being sent were because my HOTMAIL account had been hacked and the vacation message had been activated. It appeared to some people visiting my blog that the message came from there because we have also communicated off-line via my webmail.
I am in the process of running a full-scan to check for any worms but so far it appears this was a fluke and had nothing to do with WP afterall.