Same thing happened to me also. Been using WindowBlinds for the past few weeks, but after downloading yesterday's windows update, everything went screwy, exactly in the same way as a guy's screenshot.
The way to get your desktop back is to open WindowBlinds, and select the "Windows XP Style" theme (second from the left, right after Windows classic), and it'll work fine, regardless of whether or not you unload window blinds.
As for those who were saying it's an issue with pirated copies - sorry, but I'm pretty sure you're wrong. Windowsblinds runs just fine with either of the two official Windows themes, but my registered copy locks up on every other theme, including downloaded skins/skins provided with the app.
Hope a fix comes out for this soon; in the meantime, anyone know what exactly windows updater installed last night, so that we can uninstall the damn thing?