Sounds like you're using the Simplicity theme.

I'm going to talk to you as if you don't know what you are doin, not to be insulting.

1. Open the C:/Litestep/Themes/Simplicity/Step.rc (or whatever theme it is, I bet it is simplicity since I had the same problem)

2. Find the line:
loadmodule "$ModulesDir$deskfolders.dll" ;DeskFolders 2.0b4

3. Either delete the line entirely or put a ; before loadmodule.

4. Recycle