Try opening the taskmanager, and end all running processes called "Explorer.exe".
When ended, your desktop and open folders will be gone. Now go to "File" -> "Start new job" -> type explorer.exe
The desktop returns - but does "the blurry shit" return?
You may try to change the Win7 theme to basic, insted of areo.. By saying basic i do NOT mean the "win 2000 look" - but the state in between.. Also, check your video drivers.. Update them to the latest version..