Humm, LSDesk ! I know I tested it a long time ago... and I never really use it...

Deskfolder works right but, yes, there's some transparency problems you couldn't override easily. I guess you had noticed deskfolder take a snapshot of your desktop while loading. Changing wallpaper means you'll have a messy background unless you !ReloadModule deskfolder.dll (and if there is nothing on the erea it will cover)...
If you only need icons to be show, try http://www.shellfront.org/modules/icon.zip
...but I can't remember if it handle transparency correctly.