I'm having the exact same issue, using Instant sheller also, but I'm running XP Home 32bit

Theres a post I found on this very forum regarding the same problem, it being fixed as follows:
"Evidently the automatic SHELLER that is floating around does not change one of the registry keys from SYS to USR. As soon as I did that, the desktop started to appear"
But I'm stumped on how to find which registry key he's talking about
