Had similar problem in both Windows 7 and Windows 8 (64-bit) turned out to be caused by a Context Menu item inserted by Memeo LifeAgent Explore Extension Version 126.96.36.199. I used ShellExView (Free) to locate and disable the item. If you're not using Memeo Backup (Comes with Seagate backup drives) your problem may be caused by another Context Menu item. Get ShellExView at http://www.nirsoft.net/utils/shexview.html
I, too, am suddenly having the same problem after Windows 7 (64-bit) updates installed yesterday. When I right click on the desktop, I no longer see "create new folder" as an option. I do, however, still see "create new compressed folder). When folders are opened, "new folder" button is there at top menu, but when I click it, nothing at all happens; no error, no folder; nothing...
Any thoughts would be greatly appreciated,
I wish I had an answer for you. Sounds like you are having THE EXACT SAME PROBLEM I am having. It s soooooo frustrating!!!! I can't seem to figure out what is going on!!! I have tried evderything. I have been trying to solve this problem for the last four hours...uuugh!!!!