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Is it possible to edit a file on computer from within a browser?

I would like to know if it's possible to edit a file from within the browser. I know where the file is and I know its format. I would like to some HTML5 and JavaScript but have little luck so don't mind using Flash or Java.
The file I would like to edit is the hosts file. C:\WINDOWS\system32\drivers\etc\hosts on Windows XP.
This is mostly for test run of a new breed of AdBlocking so would like to give my browser and the best chance of working. I have Google Chrome Dev opened as ROOT, running on Windows XP.

Java applet with the correct permissions can access the file probably but how easy is it for the user to setup those permissions is a question I can not answer.
Flash is not going to work 100% as it can not be loaded from the internet and access the hard drive at the same time, without going into details you can trust me on that one as the security model simply does not allow it and there is no actual API inside flash to read the file, one can only forward it through to a server(only upload, no download), nothing more (if running from the internet sandbox).
Javascript - not sure, i kind of feel like it can't for similar reasons as Flash but somebody should probably confirm.
The add-blockers usually work as addons to the browser so you should probably do the same as you should have access but then again, you probably won't need it in that case...
In any case, Flash definitely is not going to work.

Java applets can as long as they are signed ..
Follow these intructions to sign an applet.
P.S these instructions are for a linux setup. You might need to set up environment variables in windows.
Jar signing link
so al long as the users allow the applet to run the applet the applet can modify anything on the file sysem and even open connections to other computers.. and most importantly the applet can be hidden in a corner if that is what you wish

Editing local files from a browser, especially a system file, is something that all browser vendors actively try to PREVENT. This is because all the virus makers are actively trying to edit these too!
If you want an ad blocker editing the hosts file to do it is a terrible idea for a number of reasons. First of all it is only going to work on Windows and your ad blocking won't help for Mac and Linux users. Second it will require permissions escalation on Vista and Windows 7. Third it would have to be reliant on something like ActiveX or Java. Fourth the hosts file would eventually get large. Large hosts file slow down internet browsing because you have to do a full lookup every time.
If you want to block ads, block them at the browser level. I hope I have convinced you that modifying the hosts file for this is a bad idea.

Applet will work in IE, but not firefox

So I have created an applet that creates a file on the local hard drive, and eventually uploads it to a CGI that I have created.
When run on IE, the applet works fine, and creates and uploads the file properly.
However, on firefox, I get an error on the Java Console, access denied, showing me that it simply can't create the file. I created the certificate myself, and did not buy one or have it verified through a company.
I need a solution that will work for anybody who potentially uses the applet, meaning the fix can't just be editing my own settings, unless I can do that with every computer that accepts the certificate.

Unsigned applets cannot access local disk on all browsers. It worked for you in IE because I believe that you ran it from file system (not via http). So, the right solution is not to create file on disk. Create content in memory and upload it. But remember: you can connect only to server the applet was downloaded from.
If you really have to create local file you have to sign the applet.

May be, some setting has to be done. One of the reason could be your Mozilla Firefox is not java enabled.
Check the following links :
A fix for Java applets not loading in Firefox
Applet loads but hidden in Firefox
To test whether java is enabled or not in a web browser, click [here]

This bug may be relevant.
It states that Firefox kills java applets that take too long to load. I have an example that works fine when loaded from a local resource but fails when it is remote. Sometimes, reopening the applet can make it work as it appears that it loads more and more of the classes each time.

develop a user defined plugin for web browser

How to develop a user defined plugin for a web browser.
It should features:
It should be installed in any browsers.
It should be executed whenever the browser starts.
It should monitor the web page and access the web page that the browser displays.
It should monitor and access the web page (for example, getting a value from a text box) irrespective of the web page the browser displays. (The web page can be of any URL either google or any domain)
How to start with it? It would be helpful if there is some sample. Thanks in advance

For Firefox < 4 write an Addon, for 4 and above Jetpack will be the way to go. For Chrome write a Extension. Opera, well wait till 11.5 ships. Safari 5. IE.
Read the documentation for each browser.
Hm...
I hope you tell the user about that.
Right now it reads like you want to deploy something to a PC and monitor all browsers, well if you want to do that you'll have to put some effort into it.

I don't think 1. is possible, you will have to create multiple versions of your plugin in order to work with each browser.
There is not a single example, because as I mentioned, you are going to have to do something different. You will need to determine and target specific browsers. I would suggest starting with one and once you have it have it working move to the next browser.

Do you mean a Plugin (like Flash, PDF Reader) or and Extension?
Plugins are native programs and extensions are normally coded in JavaScript & HTML.
Depending on what you want to do, an extension is enough powerful and the better choice.
There is no browser independent way to implement plugins. For each browsers you must read the interface reference. For example the reference for chrome: http://code.google.com/chrome/extensions/getstarted.html

Selecting folders, not files, in Google Chrome

I'm creating an extension for Google Chrome, so any code has to be compatible with Chrome and Chrome only. In this extension, I need the user to select a folder from his local machine. This simple task is becoming quite a problem. The chrome extensions options page will not run applets, so I couldn't really do Java. It's Google Chrome only so an ActiveX object is out of the question as well. I just need a simple way of selecting a folder(not a file) and passing its path to Javascript. Might this be possible in Flash Actionscript? It seems FileReference and FileReferenceList classes in AS only allow you to choose a file, and not a folder. Is there another possibility besides Flash? All the options page files DO rest on the local users machine, so it's not server side.
Thank you for your time.

You can use the webkit-directory attribute on your element to select directories and get the same sort of result as from the "multiple" attribute.
A demo of this: http://www.thecssninja.com/demo/webkitdirectory/
The chromium bug: http://crbug.com/58977

Getting the Folder Path via the Browser using Internet Explorer

I would like to create a folder selector for my application which will only run on Internet Explorer Browsers (IE6+).
I would like to get the full folder path a user wishes to use via a HTML browse button or similar and then pass this to my server side application which is written in PHP! This can not be done via JavaScript for security reasons so I am looking for any other alternative that will work.
I had implemented a solution using a Java Applet but this did not work out as it didn't work on IE6, plus the browser security is locked down where I am deploying this app, meaning I am unlikely to get away with an applet.
The current solution is getting the user to paste in the folder location into a textfiel, this isn't acceptable any more.
Any implementation advice welcome!
Thanks all

If your app is IE only you can create a simple ActiveX Control with only one method:
HRESULT BrowseForFolder([out] BSTR folderName);
ATL Wizard will give you major portion of code.
But I would consider using flash for this:
It is more widely used then Java (I
think so).
ActiveX is strongly depends on
browser's security options and more annoying to install.
Your task is rather small, so it can
be implemented without deep skills, if you not familiar with flash