I work in IT Security and my suggestions are Firefox with "NoScript" installed. Almost all of the keyloggers will come from visting sites with 0 pixel IFRAMES or just the general malcious javascript. Install Firefox and NoScript and then selectively enable Javascript on sites you trust.

Generally these loggers are installed by a call to javascript to a site that is different from the one your using, so after you have NoScript take a look at the little NoScript icon down the bottom right and see what sites are requesting to run script. I only usually enable (and then only temporarily) the site I am visting, or sites I know about (like youtube for example to see movies).

Its still possible for hackers to compromise a site itself and put the javascript files on the main site but its alot harder than just pulling their script from their own site.

I honestly think part of the issue here is that its becoming harder for farmers perhaps to make gold and so a good way to make some is to hack accounts and liquidate the accounts items. Or use the char in SL for what ever that is. Its alot cheaper than continually having to buy/register new accounts to farm.

A good thing to use is a program like SnoopFree Privacy shield. It is a free program the actively monitors your computer for activity like screen reading and keyboard hooking and deny access. You can find a series of good free programs to choose from here:
http://www.raymond.cc/blog/archives/2007/09/20/how-to-beat-keyloggers-to-protect-your-identity/
I personally use SnoopFree myself and highly recommend it.

Excellent post, Ironhide.

I'd also recommend password utilities like KeePass and Keyscrambler.