Found a solution by comparing the registry on a computer I'm fixing to my own Vista machine.
I think the spyware responsible for this makes a simple change to keep you from installing anything new... go to the UserShellFolders folder in your registry, the one where you were told to delete the Recent folder. Look at the APPDATA folder and notice that it has the path $APPDATA$. On my good comp, the path was %USERPROFILE%\AppData\Roaming
I changed the path on the bad comp to %USERPROFILE%\AppData\Roaming and rebooted into safe mode. I was able to install MBAM without a hitch and am currently running a scan the machine.
Hope this helps... good luck!
Thanks for this good info