Well I HAVE YOUR SOLUTION! Consider it fixed!
This works in Vista as well
More than likely, Settings.ini is corrupted!
1) Go to my computer, then search for settings.ini
2) Rename the file to something recognizable like settingsBUSTED.ini, ....BROKEN, or whatever you want.
3) The file should be recreated by windows and should work.
If you have multiple instances of the file, rename each one until your gadgets, widgets, sidebar or whatever start to work.
Sometimes you cannot rename some instances of the file... So start with the ones that allow you to rename.
For me, this totally worked like a charm!