This didn't fix the problem. There was nothing selected and nothing to delete.
The problem was related to active desktop, but was not fixable through this. I will say that my solution is rather generic, and I don't believe a true fix. However, it does allow my desktop background to be displayed.
I edited the registry entries for disable active desktop (noactivedesktop key), and changed them to true (1). This can be done through microsoft management console as well (mmc).
I say its not a true edit because I would think that enabling active desktop wouldn't result in your desktop background being covered. I don't know though because I haven't used it much.
Edited by redgar, 05 December 2008 - 02:00 AM.