I just fixed this issue, so if this helps anyone, here is the fix:
In my case, this was definately a VIRUS! In most cases, based on what I had and what I have seen on Google search, it is due to a bug. In my case it was due to the Virtumonde virus (one of the versions). The one thats out in 2009 spreads itself into many variants on your PC really fast. Even a popular anti virtumonde tool didnt find or fix it in my case. To fix it, you need to install one or more free antivirus programs. I use AVG, SpywareDoctor, and an old copy of Pest Patrol. You can download these from downloads.com for free. AVAST also works good.
The reason you want several is each found different instances of the virus on my PC. What you do is if all you can see is your desktop, or a flashing desktop that is cycling and shows no icons (I saw both), first press ctrl+alt+delete and that will open the Task Manager. In there, click Applications tab, then at the bottom right click the "New Task" button. In the popup type "explorer". That will open up a new instance of Windows explorer, and you may see you desktop icons briefly and the tool bars and Start. It then may disappear again. You do this so you can see whats going on and open up programs if you need to. In my case the virus had messed with explroer which was logging out then attempting to log in again and restart. At this point I would go back to the Task Manager screen, click "Shutdown" at teh top menu and restart.
When your computer reboots, start tapping the "F8" key. That will take you to Safe Mode. Follow the black screen instructions and in XP/Vista, in safe mode you can remove the virus. Once in Safe Mode, start opening up one of your anti-virus programs and have it run full scans and see if it finds the bug. Most will, and you can remove the virus. Shut each down and start another. You want to get all of them. In my case I say 48 instances. If you dont see your desktop in safe mode, BT, as I didnt, do the same as described above to open Task Manager and open explorer to get to your programs. After you have cleaned off the bugs, I would now do a check disk, by right clicking the you C drive (local disk) icon in your computer root folder, choosing properties, then Tools tab, then click Check Now button. You can click to set a checkdisk on reboot. This will fix broken clusters, etc. Now reboot. That should fix it.
If you still see the blank or fivering desktop, the virus has replicated itself again. You might try AVASt as it sits in the memory kernal before startup and will allow you to stip it out that way. I also recommend a cool registry cleaner that will take away any last issues. Its here:
http://personal.inet.fi/business/toniarts/ecleane.htm
Good Luck!EM Stokely