Mislinked Desktop Icons

This is going to be rather complicated to explain but here goes my best attempt... I have the OS installed on the C drive. I have all of the documents mapped to a seperate but still internal E drive. I have done this with both XP and Vista and there have been no problems.

Windows 7 linked it correctly but now my desktop is cluttered with all of the folders on the E drive (Contacts, Desktop, Downloads, My Documents, My Music, My Pictures, My Videos, etc). First thought is 'oh, these are shortcuts and I will just delete them.' These are actually directly linked to the E drive and deleting one of these icons deletes the folder from the E drive. So I had to Restore all of them from the Recycling Bin.

My next attempt to fix it is to Right click on the desktop and go to Personalize. I clicked Change Desktop Icons and 'User's Files' is not selected. So they are not showing up because of any Desktop Icon setting.

My final attempt to fix this is I deleted all the folders from the desktop. This deleted the folders from the E drive as expected. I had them backed up on an external harddrive. I transfer the folders back to the E drive from the external harddrive and they show up on the Desktop again as soon as they transfered. It also has a link for AIM and Skype. Neither of these appear on the E drive. When I get the Properties for these links, they tell me they reside at C:\Users\Public\Desktop which does not exist.

Here is the info for my computer:
Version 6.1.7100 Build 7100

I'm not sure what other information would really help solve this issue other than a complete clean install which I just got done doing and would perfer and alternate solution. I want to be able to remove the folders from the desktop but not the harddrive. What controls the folders that the computer puts on the Desktop? Another weird thing. Under my Document folder (the folder that is in the Start Menu that has my name on it), the E drive shows up and is not deletable. I am not sure why that appeared either but I am sure it has something to do with this whole mess.

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