I had similar issues. No problems for months and months and then suddenly ... the following symptoms:
1) Booting to desktop all my icons are organized according to my design using fences. But no fence windows appear (mine are semi-opaque)
2) Right-clicking desktop brings up the Fences control panel (Configure Fences), but none of the settings have any effect whatsoever.
3) Dbl-clicking and hitting ESC on desktop has no effect whatsoever.
MY FIX:
I went into my System Restore (Windows Menu > Search Programs and Files > System Restore )
Undid my most recent "Critical Windows Update" that occurred on Monday May 20th ... rebooted and FIXED.
Hope this helps you!
Running Windows 7 Home Premium 64-bit
Intel Core i5 750 on MSI P55M-GD45 (MS-7588) w/8GB OCZ DDR3