The Docs & Settings folders...contain the user profiles (My Documents, My Music, Favorities, etc.) for users on a system. That's the way that XP is set up (I can't address Vista because I've never installed it).
The Control Panel/User Accounts...is what I consider a control, reflecting the users and profiles which are reflected on a system in the Docs & Settings folders.
The Docs & Settings folders are system folders and (normally) cannot be deleted in the same manner that any file can.
Sounds to me...as if you have a damaged profile. You might take a look at Copy Data from a Corrupted User Profile to a New Profile in Windows XP - http://support.microsoft.com/kb/811151