cannot set folders to show as web content

Somehow something changed with my Win2000 with SP4 where I can no longer set
hard drive folders as web content. That option is grayed out and cannot be
set. If I click on set default a folder changes somewhat but if I get out and
go back to that folder its back to classic mode.

Also for the taskbar, before I could right click anywhere on it and get to
task monitor or to make changes for toolbar.
Now I can only get this popup is to right click far right where time is,
I can now click for task manager but toolbar functions are grayed out.

What got changed and how to fix it.

Thanks