Hi geo2164,
When you say "Tried this...it is not the problem...", do you mean you changed the setting and nothing happened? Or the setting was as it should be?
Standard settings for "always thumbnails" are:
Make sure "Show thumbnails instead of icons" under Start, R-Click (My) Computer, Properties, Advanced System settings, Advanced Tab, Performance, Settings Button, Visual Effects Tab is ticked and that "Always show icons, never thumbnails" under Windows Explorer (any open folder), Tools (in the "Menu Bar"), Folder Options, View Tab is unticked.
After changing/checking delete your (hidden) IconCache.db which you'll find in your...