Hovering mouse over desktop and Windows Explorer items won't select them

[The Ghost of General Lee]

I have my XP SP2 machine set to select desktop icons and Windows
Explorer items when I hover the mouse over them. But lately, it is
not doing as it should. The option Tools | Folder Options |
Single-click to open an item (point to select) is enabled. I've
switched it to double click and back to single, but this does not
help. It will still open an item when I single click on it, but it
will not select anything without either right-clicking on it or
scrolling using the arrow keys on the keyboard.

I'm using the same mouse I got with the system. I hadn't installed
any new software at the time. I am current on all XP updates. I
noticed this problem first began after moving some items around on my
desktop. It seems I dragged an item too far to the bottom of the
screen, and after that, I could no longer select by hovering the mouse
cursor.

I'm out of ideas, short of wiping and re-installing XP. Any
suggestions?

 

[Squire]

Try System Restore to a previous date before this began.