Well, Ayush led me in the right direction. None of the first 3 remedies
worked, but the 4th one did. Here is the "official" cure from Microsoft:
SYMPTOMS:
When you try to change the desktop wallpaper in a Microsoft Windows XP-based
computer, the options may be missing or unavailable. Therefore, you cannot
change your wallpaper or use other options that are located in the Display
Properties dialog box. This problem may occur after you remove spyware from
the system.
CAUSE:
This problem occurs when a registry key is set to hide or to lock the
display settings on the computer. The registry key can be set by an
administration policy or by malicious software.
RESOLUTION
Warning Serious problems might occur if you modify the registry incorrectly
by using Registry Editor or by using another method. These problems might
require that you reinstall your operating system. Microsoft cannot guarantee
that these problems can be solved. Modify the registry at your own risk.
To resolve this problem, follow these steps:
1. Click Start, click Run, type regedit, and then click OK.
2. Locate and then click the following registry subkey:
HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Policies\System
3. In the right-pane, right-click the NoDispAppearancePage value if the
value exists, and then click Delete.
4. Repeat step 3 for the following registry values if these values exist in
the registry:
• NoDispCPL
• NoDispBackgroundPage
• NoDispScrSavPage
• NoDispSettingsPage
Note Locate any registry value that says "Wallpaper" if it exists. In the
right pane, right-click the registry value, click Delete, and then click OK.
5. Locate and then click the following registry subkey:
HKEY_LOCAL_MACHINE_\Software\Microsoft\Windows\CurrentVersion\Policies\System
6. In the right-pane, right-click the NoDispAppearancePage value if the
value exists, and then click Delete.
7. Repeat step 6 for the following registry values if these values exist in
the registry:
• NoDispCPL
• NoDispBackgroundPage
• NoDispScrSavPage
• NoDispSettingsPage
Note Locate any registry value that says "Wallpaper" if it exists. In the
right pane, right-click the registry value, click Delete, and then click OK.
8. For the changes to take effect, you may have to restart the computer
after you delete these registry values.
Everything works fine now and I am happy.
Thank you