GeneticJester,
It looks like you may have the "Lock desktop items" enabled.
Right-click desktop > Properties > Desktop tab > Customize Desktop button > Web tab > deselect "Lock desktop items" > OK > Apply.
This may have been the issue with Gene as well, I believe I misunderstood his issue at the time.
I hope this helps.
Sorry, could not edit above.
Easier way = right-click desktop > Arrange Icons By > deselect "Lock Web Items on Desktop".
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