Cannot delete or modify file in C drive

I have stumbled upon a very bad system behavior of XP Home edition. I had some problem with my hard drive initially, my OS XP-SP3 crashed. I reinstalled the OS using repair OS option which installed the OS. I then did windows updates and downloaded bunch of updates 3 to 4 times and now on XP-SP3 version. Recently I am seeing that any or folder or shortcut file I create and move it is restricting my access to read-write-delete-move the file. Not only that, if I accidentally move any folder from my documents or from anywhere in C drive I cannot undo that operation It pops up error of cannot move file. Note that I am logging as <Computer>\<user> who is also the member of administrators group. It is very frustrating. I tried looking over different forums and did the actions of;
1. Running the Microsoft Fix it to repair issue of 'Changes to the size, view, icon or position of a folder are lost' (And it fails to fix it)
2. Ran the Sfc/scannow
3. Logging in as 'Administrator' from safe mode and try deleting the files / folder of this user from explorer.

4. Ran the Microsoft Security Essentials and Malware AntiMalware to see if there are any bugs / viruses.

However my other partition drive (D:) works fantastic. There are no issues on this drive.

I need some good solution and permanent fix for this issue. Let me know if there are advanced steps to fix it.
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More about cannot delete modify file drive
  1. Check the user rights for the folders. Just because your user is in the admin group, does not mean it's automatically has full rights to everything. You need to make sure that the group has rights you need on the files/folders.

    If you used "repair" you may want to do a fully clean setup instead if you find that all of your rights are listed as they should be.
  2. I tried changing the ownership of C Drive and it messed up my system. Now I see issues and same message of cannot delete file with my apps and error pop ups during startups. Can you tell me how do I restore the default permissions that comes in XP Home or can you list the default permission settings for C drive, Document and settings folder and Program files folder. I will do that. Again please be as specific as you can.
  3. Administrators, Creator Owner, System, Everyone has rights to root of C:\ but you can't just filter that down to every directory. I guess technically you can but that's not the default rights for every folder.

    Take a look at this
  4. I happened to manually add security permissions to C drive and some well known windows directories. I need to take my backup files out first and I don't mind blowing my computer off. Later, I will try those settings that is posted in techarena and see if that improves or worsens my problem. But thanks for your help. In the meantime if anyone has experienced similar issue and fully resolved it then I would really appreciates if you post your experiences here.
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