Paul has reported some vulnerabilities in Internet Explorer, which can be exploited by malicious people to bypass security restrictions and potentially compromise a vulnerable system.

1) It is possible to redirect a function to another function with the same name, which allows a malicious website to access the function without the normal security restrictions.

Successful exploitation allows execution of arbitrary script code in the context of another website. This could potentially allow execution of arbitrary code in other security zones too.

2) Malicious sites can trick users into performing actions like drag'n'drop or click on a resource without their knowledge. An example has been provided, which allows sites to add links to "Favorites". However, resources need not be links and the destination could be different than "Favorites".

This issue is a variant of an issue discovered by Liu Die Yu.
SA9711

http-equiv has posted a PoC (Proof of Concept), which combined with the inherently insecure Windows "shell:" functionality, can be exploited to compromise a vulnerable system.

3) It is possible to inject arbitrary script code into Channel links in Favorites, which will be executed when the Channel is added. The script code is executed in Local Security Zone context.

An additional issue allowing malicious sites to inject script into the Local Security Zone using anchor references has also been reported to affect Internet Explorer 6 running on Windows XP SP2 (release candidate / beta). This issue could not be confirmed on a fully patched Windows XP SP1 system.

Issues 1-3 have been confirmed on a fully patched system with Internet Explorer 6 and Microsoft Windows XP SP1.

Previous versions of Internet Explorer may also be affected.

Solution
Microsoft has issued patches (see MS04-038 or SA12806, and MS05-014 or SA11165).

Provided and/or discovered by
Discovered by Paul (greyhats).

Changelog
Further details available in Customer Area

Original Advisory
MS04-038:
http://www.microsoft.com/technet/security/bulletin/ms04-038.mspx

MS05-014 (KB867282):
http://www.microsoft.com/technet/security/bulletin/ms05-014.mspx

Other references
Further details available in Customer Area

Deep Links
Links available in Customer Area