Well, cracked Minecraft still exists... And it can't be an external hacker. They'd have to be on your same router to join the LAN server. It's LAN.
And addressing the skeleton with horns, it could be a re-textured cow.
Are you sure it's a LAN server and not a Bukkit one? Because with Bukkit, there is plenty you can do to recreate what you described...
The only prob about this is that you were stupid enough to post the part about how Minecraft takes over your computer. Do a Google search of Error 666. Shows up as a modem error.
If you have REI's minimap, then you must have Modloader. I've been getting the same problems lately, and this has never happened before. Modloader just takes my computer 2-3 minutes to load MC, and I have no idea why.
Try updating your Java (OR downgrading it if you recently updated it, as that may be the problem).
If you have internet, you'll be able to download OptiFine. And if you downloaded the right version for your computer and Minecraft, then it should work fine. Try using the Light version, if you don't have mods. You can also try the Standard.
It would probably be an interesting review. You'll have comments of rages and compassion. Some people love eight pixel wide blocks, others can't stand it. If you have the computer that's up for it, I've been wanting a review of this texture for a while.
Apply for building, skinning, or bloggin'. I don't know which I'm best at. But I'm working on a bigger map that I didn't upload yet, but I can give you the MediaFire link.
How much experience do you have making mods? I would suggest making arrows throwable by right-clicking. I was planning to make that myself as a first or second released mod, but you can have the honors.
I could do a mod review, but I don't have a youtube account. But I could just give you the video. Also have any free way to record without lag? I'm using CamStudio. But it's like 15-25 FPS, mostly higher. So if you want to, I could.
Honestly, it's a bit too well written for me to believe it. And you also put "This bed is occupied already" in quotes, which makes me suspect something. I wonder why some dude who knows Java can't just examine the script to see if Herobrine's there.
Actually, if you look in the picture, notice how herobrine is partially covered by the torch. And also notice how the blue circling showing him covers the area where his feet touch the ground. This can suggest that it's edited.