Definitely sounds like a ORACLE_HOME issue; unless the TOAD install was not clean (did this work at any point) ?

Here are some ideas:

from a DOS prompt, type PATH. TOAD is most likely using the ORACLE_HOME that is the first one in the PATH.

OR

you could simply force the ORACLE_HOME. In Control Panel, System, Advanced, Environment Variables, create a system variable TNS_ADMIN, and point that to the location of the tnsnames.ora file. That will force all connections to resolve the SID using the tnsnames.ora in this directory:

Variable Name: TNS_ADMIN
Variable Value: c:\oracle\oraHome9i\network\admin

Good Luck.