ruddervader

John,
Well, after a week of beating my head against the keyboard I still have not found a solution that works. I spent three nights with our friends from India at MS Support and while they were very supportive they could not figure out a fix. At their suggestion I uninstalled Vista SP1 and my anti-virus (F-Prot).

I have gone to Organize, View, Folder Options and checked and unchecked "Always show icons, never thumbnails" about a hundred times (With and without restart).

I have gone to Control Panel, Ease of Acess, Make it easier to focus on tasks, and checked and unchecked "Remove background Images" as well.

I have posted HJT logs on What The Tech, run spyare, adware and anti-virus scans in normal and safe mode and "As Administrator". I think I had an "Adware-Alert" attack which I cleaned up with MBAM. All scans are clean now.

I ran Regedit and checked in "Windows Current Version", "Policies", "System" in both Local Machine and Current User and found no reference to wallpaper or desktop background.

This problem affects all users (created new user and Administrator).

This issue seems to have migrated into a desktop background issue. I can see thumbnails in all my file folders now but I can't see thumbnails if I "Personalize ",
"Desktop Background". I can see Solid Colors (and can change them) but if I choose Windows Wallpaper from the Drop Down I only see generic icons or place holders. They are highly pixelated icons. If I choose Pictures folder I get the same thing. If I click on browse I can see the thunbnail view but no matter what I click on I can't set it as background. (Except for the few bmp files I have in My Picures).
I can never right click on a thumnail or any image and "Set as Desktop Background".

I have Adobe Photoshop and Gimp installed but they were on here long before this problem started.
BTW WindowsMedia Player seems to function normally.

I still feel that there is some obscure basic setting that I am overlooking or the malware attack changed some fundamental Registry Setting that I am not aware of.

There seems to be scores of similar issues posted around the net but I have failed to discover a definitive answer for this particular combination.

Maybe I should start a new thread as "Can't change Desktop Background"?

I apoligize about the lengthy rant.

ruddervader