If you can't create shortcuts on your Desktop, you might have a corrupted registry.
Start Regedit
Go to HKEY_CLASSES_ROOT\.lnk\ShellNew\Command
Make sure it has a value of:
RunDLL32 AppWiz.Cpl,NewLinkHere %1 if you don't have IE 4
or RunDLL32 AppWiz.Cpl,NewLinkHere %2 if you have IE 4.0 or IE 4.01
Start Regedit
Go to HKEY_CLASSES_ROOT\.lnk\ShellNew\Command
Make sure it has a value of:
RunDLL32 AppWiz.Cpl,NewLinkHere %1 if you don't have IE 4
or RunDLL32 AppWiz.Cpl,NewLinkHere %2 if you have IE 4.0 or IE 4.01
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