Black screen with mouse cursor - new recovery, new hdd

I have a client computer,
ACER Aspire 5534 laptop
with Win7, AMD x2 L310,
ATi Radeon 3200HD video,
4GB ram,
new Western Digital SATA WD2500BEVT-22A23To ATA hard drive.

Customer brought to me with similar situation - black screen after windows logo with only mouse cursor. Ran system repair 6 or so times - no change. Could load task manager with Ctrl+Alt+Del and then run explorer to get to a desktop. No icons no matter what. Ran HDD tool Spinrite that showed many (11) recoverable and many more unrecoverable (20) data blocks.

Replaced HDD (new wd), performed ACER System Recovery with ACER supplied (purchased via ACER website).

When the system boots there is only a black screen with a mouse cursor. Can load Task manager but not explorer. Can run IExplore, wordpad, etc.

Some of the Windows graphics are weird. See the attached file and look at Screenshot 1 at the IE8 tools menu icon for toolbars, menu bars, etc. Also in the same document Screenshot 2 shows the System properties but does not show what version of Windows 7 is installed (I'm in Safe mode)

***
Details of SFC /scannow
Microsoft Windows [Version 6.1.7600]
C:\Windows\system32>sfc /scannow
Beginning system scan. This process will take some time.
Beginning verification phase of system scan.
Verification 100% complete.
Windows Resource Protection found corrupt files but was unable to fix some of them.
Details are included in the CBS.Log windir\Logs\CBS\CBS.log. For example
C:\Windows\Logs\CBS\CBS.log
The system file repair changes will take effect after the next reboot.
C:\Windows\system32>
***

Any suggestions? Willing to try just about anything.

Thanks in advance,

Hu

Tried to open C:\Windows\logs\cbs\cbs.log but get an access denied error (?)

Performed system recovery again but same results. Got an error at the end of the recovery -
ecovery failed - Error code 1392 (The file or directory is corrupted and unreadable.) Restore unsuccessful.

I can open apps from the task manager "run" and also browse the internet via wireless. Can open Control panel, network and sharing center but can't run Explorer from the task manager. Can open windows such as C:\, etc.

Cannot run regedit, notepad but can run wordpad (?)