No error message but my desktop goes black with icon's remaining fine. Edit:  And I do get a message that Dreamscene is required to be installed but not everytime.

Did you run Windows Update and check that under 'Ultimate extras' you've installed Windows Dreamscene.

Also if you've done that, just uninstall and re-install deskscapes, if still the problem persists,

then I feel, as vLite is a component to make Vista run faster, it has disabled dreamscene on your system.

Simply restore your system to a back date when dreams were working for you. This is the easiest possible way out but be sure to save your downloaded skins or other stuff since then before doing it.

Got it working by downloading Dreamscape for Window's 7, Deskscape 1.02 and enabling custom>show translucent selection rectangle (it already was, had to activate custom) in control panel>performance information>visual effect's.