-Can you rename the folder? if so, then try deleting it again.
-Try running the "Desktop Cleanup Wizard"
To remove unused desktop icons
Open Display in Control Panel.
On the Desktop tab, click Customize Desktop.
Under Desktop cleanup, click Clean Desktop Now.
Follow the directions in the Desktop Cleanup Wizard.
Notes:
To open Display, click Start, click Control Panel, and then double-click Display.
The Desktop Cleanup Wizard displays a list of the desktop icons that have not been used for 60 days or more, enabling you to remove those icons that you don't want on your desktop. You can retrieve icons you have removed by opening the Unused Desktop Shortcuts folder on your desktop.
Clear the Run Desktop Cleanup Wizard every 60 days check box if you don't want the wizard to run automatically every two months.
You can remove an individual desktop icon by right-clicking the icon and then clicking Delete.
To add or remove the icons for My Documents, My Computer, My Network Places, or Internet Explorer, select or clear those items under Desktop icons.
-Also try deleting it from a DOS box...
Right-click on the folder, select properties. Where it says the "location" highlight the whole drive path with the mouse then right-click and select "copy".
Goto Start menu and click on RUN.
Type in cmd then press Enter.
type in cd\ then press Enter.
Type in cd then press space once then right-click on the end of that line with the mouse and select "Paste"... then press Enter.
Type in rd XXXXX (replace the XXXX with the folders name) then press Enter.