Has it got up to date anti-virus software, an active firewall or any anti-spy-ware programs?
If that message is accurate, and he isn't on a network, I would suspect a trojan, virus, or even a hacker using the machine. Not necessarily to "rob" your brother in law, but maybe as a relay for spam or spreading virus's.
A good scan for any suspicious files must be a first port of call, and if the family use it on sites like Kazaa, you might as well accept your in for a format and re-install!
As regards XP's logging facilities, they may provide a clue and can be found via Control Panel; Administration; Computer Management, but are much more geared to recording system failures and malfunctions, rather than malicious programs.