This is exactly the problem I have but I have no idea what to change in the registry. The problem appeared the day after I installed Avast Cleanup Premium.
I should add, things have got worse. I can now log into my password protected profile. Sort of. Instead of taking me to my familiar well worn desktop, it opens a new desktop that you would see the first time you open windows. When I check windows explorer, in C:/Documents and Settings/my profile/desktop, all is as it should be but that configuration does show on the actual desktop. I can find it quite easily, hell, a blind man could find it with a cane, but windows is oblivious. I did note that those files in explorer in the specialized portion which includes favorites, desktop, network, control panel and recycle bin are not correct. This has affected the personalization of my start menu, saved downloads, libraries, email client, browser and who knows what else.
As you can appreciate, I am furious. I need this fixed. All advice welcome.