OMG, I can't believe after all these months searching and just living with this issue, I finally figured it out on my own right after posting here. It wasn't the mouse settings, but I did discover what it was. Hopefully my resolution can help someone else down the road.
I realized today that when I click Start->Computer, the issue does not happen. It only happens with my special launcher I made, but I use this pretty much exclusively instead of Start->Computer.
One of the first things I do after install is change the shortcut of the folder icon on the taskbar so that when I click it, it starts in Computer instead of Libraries (personal preference). I always do this by searching online for the shortcut target string. Well, I must have found a site with a bad string this one time.
Normally, the shortcut is set to this to make that happen:
However, this time I somehow got this as my launcher string:
For some reason that screwed up launching of opening drives. With the /e, it now works the same as Start->Computer - and I'm happy again