I have two blunt force fixes to your issue.
Your screenshot to me indicates that one of your sidebar gadgets is either improperly programmed, malfunctioning or a combination of both :$
I know this from personal experience. Having tried to create a side bar application myself and running into a few *ahem* frankenstein creations *ahem*, I had those white boxes too. The brute force approach is if you know what add-on is causing them you can delete them directly from
E:\Program Files\Windows Sidebar\GADGETS\
E:\Program Files\Windows Sidebar\Shared Gadgets\
Note: I have a dual boot so Vista for me is installed on E:, XP on C:. You may need to change that E for a C.
Next option, which is a bit less brute force is to edit your settings.ini file in here:
E:\Program Files\Windows Sidebar
Your settings.ini file can be opened and edited with Notepad. It'll say something like this:
If you know what section is broken, you can just delete that 'Section' from your settings.ini or try renaming your settings.ini file to settings.old.ini and windows might default to the clock, notepad, rss feeds or just copy mine for the windows default.