Windows Explorer stopped working XP

I am running XP SP3 in Parallels 5 - Mac OS 10.6.3

Windows explorer 8 stopped working - It opens, but not completely - it does not connect to the web.

I tried to remove and reinstall IE Explorer. Also tried Firefox and Chrome.

Any Browser including IE8 reinstall - then results on a pervasive Windows Explorer (not IE) stopped working. The toolbar at the bottom and the start button stops working as well. Only recover is to copy back last night's backup of virtual machine - which again works fine except for an unusable IE 8 and the inability to install any other browser.

Any ideas how to fix this other that a full reinstall - which I really want to avoid? I only use a couple of programs but have lot's of tweaking on them.

Thanks