The following things I know.
The desktop is replaced by a file that reads from c:\desktop.
I know this, because when I delete or place icons into this directory they magically appear on my desktop.
I have done the following.
Taken an installed XP on a new hard drive and loaded Kaspersky virus software.
Run the virus software on the old xp disk. It had a few virus, but now runs clean.
I also ran LavaSoft Adware on the old xp disk, it also runs clean.
At the moment I can only run firefox internet service without problems. (That is until the system becomes so unstable it freezes dead.)
When I first sign on, I can start programs through the Start menu, but about 25 minutes in this is no longer possible, but I can start programs through task manager.
When I close a program the last screen stays. New programs can be moved around the screen to create all sorts of cool patterns.
What happened in the past, I had some trojan/virus that placed a danger:spyware screen on the computer, following some hodge podge of directions I recovered my desktop, the ability to change display items, and to change the background. I still can not change user settings, reinstall my sound card (which windows thinks is functioning fine, but isn't working at all) there is no sound card in the sound control panel.
What else. I originally had a topic in Malware, but the gentleman helping me- said he was sending me to the lavasoft group, but just deleted my topic.
At this point I really just want to know what is happening. How can my desktop be replaced by this file, why can't I access the user control panel or my sound card?
I suspect it is in part my registry is corrupted and in part that some dll or exe has been replaced.
I would post a hijackthis log, but it is not very easy to get anything to run on the other computer for long.