That is the intent. To the best of my knowledge, IE will now prevent MOST forms of malware from being automatically installed. However, if the user choses to download and install programs with malware built in .... programs like Ad-aware, and Spyware - Search & Destroy will help clean them out. The intent is to help prevent automatic installations, without preventing the user from contaminating his own machine.
It's about time. I know of a number of folks who have switched from MS Internet Explorer to FireFox to avoid such downloads.