Thanks for the theme Jerry. It's an improvement, but the selected icon/folder still has the box around it accept with what you changed in that the box now disappears only while dragging the icon around. The box comes back once the item is dropped and it my main target with the mouse.
The main issue is that icon/folder is still hard to place where I want...I just noticed that the icon/folder gets bigger when you pic it up to drag it...which is mainly what makes it awkward to place back down in the correct spot. This doesn't happen as I drag folders in winXP.
I love Windows 7 but this is frustrating, lol!
Edit: I found a thread which I think it related? Disable Large Icon when Drag/Drop Files to New Location
It mentions what I have discovered...moving desktop items doesn't cause an issue (I still get the blue border around the selected item, but it doesn't get bigger and can be placed down with precision), only in folders. I think it's an aero issue that can't be resolved unless I use classic mode. That sucks.