Make the following reg entries and delete the C:\desktop folder. AND REMEMBER YOU ARE DIRECTLY EDITING THE REGISTRY, YOU'LL NEED TO
BACK IT UP BEFORE PROCEEDING...
Navigate to and modify the registry entries below:
HKEY_USERS\S-1-5-18\Software\Microsoft\Windows\CurrentVersion\Explorer\User Shell Folders
Select "Desktop" and change the value to %USERPROFILE%\Desktop
HKEY_USERS\S-1-5-19\Software\Microsoft\Windows\CurrentVersion\Explorer\User Shell Folders
Select "Desktop" and change the value to %USERPROFILE%\Desktop
HKEY_USERS\S-1-5-20\Software\Microsoft\Windows\CurrentVersion\Explorer\User Shell Folders
Select "Desktop" and change the value to %USERPROFILE%\Desktop
HKEY_USERS\.DEFAULT\Software\Microsoft\Windows\CurrentVersion\Explorer\User Shell Folders
Select "Desktop" and change the value to %USERPROFILE%\Desktop
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\Explorer\User Shell Folders
Select "Desktop" and change the value to %ALLUSERSPROFILE%\Desktop
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\Explorer\Shell Folders
Select "Common Desktop" and change the value to C:\Documents and Settings\All Users\Desktop
HKEY_USERS\S-1-5-18\Software\Microsoft\Windows\CurrentVersion\Explorer\Shell Folders
Select "Desktop" and change the value to %USERPROFILE%\Desktop
HKEY_USERS\S-1-5-19\Software\Microsoft\Windows\CurrentVersion\Explorer\Shell Folders
Select "Desktop" and change the value to C:\Documents and Settings\LocalService\Desktop
HKEY_USERS\S-1-5-20\Software\Microsoft\Windows\CurrentVersion\Explorer\Shell Folders
Select "Desktop" and change the value to C:\Documents and Settings\NetworkService\Desktop
That will fix part of the problem, you also probably can't rightclick your mouse on the desktop, nor change your background, (it's grayed out). Do the following for those.
PROBLEM #1:
Can't right click mouse on the desktop.
Navigate to the following key:
HKEY_LOCAL_MACHINE\Software\Microsoft\Windows\CurrentVersion\Policies\Explorer
Look for a DWORD value called "NoViewContextMenu"
When located right click and delete it!
Navigate to the following key:
HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Policies\Explorer
Look for a DWORD value called "NoViewContextMenu"
When located right click and delete it!
PROBLEM #2:
Can't select "Background" because it is greyed-out.
Navigate to the following key:
HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Policies\ActiveDesktop
Look for a DWORD value called "NoChangingWallPaper"
When located right click and delete it!
After doing the above, reboot normal and see if problems remain.