So this one had me pulling my hair out.
My main Windows XP box is a VM running under VMware Workstation 6. It began life running under VMware Workstation 5, and I never bothered to upgrade the VM to Workstation 6 compatibility until I needed USB2 support to handle a Zune that Microsoft so nicely sent me for Christmas. The Zune install was unfortunately problematic, involving a few bluescreens, but was eventually successful following a few reboots, uninstalling and reinstalling. All was well until I fired up the VMware Virtual Infrastructure Client 2.0 to run some tests in the lab. The app wouldn't display all objects nor any VM labels, and the layout was all over the place -- essentially unusable. Uninstalling and reinstalling resulted in no change, so I assumed that the Zune installation had borked the .NET installation that VIC relies on. Uninstalling and reinstalling .NET 1.1, 2.0, and 3.0 had no positive effect either. This was a major problem, since of course I didn't take a VM snapshot before installing the Zune software.
I had a slightly older version of that same VM on another system, so I moved that over to my workstation and tried again. Booting that VM had me back into a stable version of VIC, so I upgraded that system to VMware Workstation 6 compatibility and rebooted it... only to find that VIC was again broken. I reverted back to Workstation 5 compatibility and VIC started working properly again. After hours of frustration and ill thoughts towards the Zune, it seems that this was actually the problem(?! ... *&#^$*%&^!%@!).
This is completely reproducible, at least on these VMs, and really has me wondering... why would changing the hardware compatibility level for the VM break VIC 2.0? I don't know, but it certainly does.