XP MCE corrupt shortcut icons

Windows Xp Mce
Hello, I am having a peculiar problem with this computer. When I create a shortcut in any file folder it seems to get corrupted somehow. As soon as I create a shortcut or move, copy it it loses all properties and the icon. It will not let me delete, or move it out of the folder. This has me baffled and perplexed. I did a repair install 3 times and cleaned and defraged the drive. Any help is appreciated. Thanks

What you are doing does not make much sense - can you explain more precisely how you are creating shortcuts? I say this because as a rule, shortcuts are only created in one place - the desktop. I don't really see what a shortcut would do, or be, if created deep into the folder structures.
For example, in my XP pro, I can use Windows explorer to view a folder structure, and sure enough, 'create shortcut' is an option on right-click - but it does nothing