OWWWW OWWWWW...... Had the same problem...
Well if you installed any programs that change windows like "Desktop X" or "Window Blinds" ect. then dont bother trying anything. Might as well reformat drive... If you recieve "ERROR: Couldn't anitialize Service" then dont bother and reformat drive...
IF you right click on desktop and nothing appears then reformat drive..
Basically, press CTRL+ALT+DEL and log off, then log back on and if all your icons and tool bar appears, then dont bother and reformat drive unless you dont mind logging off and on every time...
Prior to this problem, try to remember if you uninstalled any programs that issued you to delete a file that another program might be using... If you did, then definitly reformat drive.