The arrow setting didn't actually cause this issue directly, but it did help
in a way. After fixing the issue, you should be able to use the smaller
arrow fine (I do).
First, try forcing Windows to use True-Color icons:
Open your registry editor and navigate to
HKEY_CURRENT_USER\Control Panel\Desktop
and change the "UserPreferencesMask" value to "9c 00 00 80" (all digits).
That will require a restart to take effect.
If that doesn't work:
Try the fixes on line 4 and 214 at
http://www.kellys-korner-xp.com/xp_tweaks.htm. One or both will fix your
problem. Good luck.