Just an update - based on my experience with "fixing" the system, I've decided to back up the data and make a fresh installation (no point in loosing more time on trying to resolve the issue but just spend the time on new system and at least enjoy a faster Windows for some time). Funny though that a year ago I had to do the same due to some dll corrupt file (it was much worse then). I really love Microsoft!
P.S. Thanks for reading this thread, if you think you may add something (so in the future if someone looks for info on how to fix it) feel free to add some advice.