Windows 7: url file functionality seems toasted, usual solution didn't work

Symptoms:

1:
right-click in a blank area -> New -> Shortcut
http://www.sevenforums.com/
Next
Error: The file http://www.sevenforums.com/ could not be found

2:
In Internet Explorer (first 9, then 8), go into favourites, click on a favourite, nothing happens.

3:
In User > Favourites, double-click on a favourite/url file
security warning appears (for any url file, as if it was a downloaded file), click on 'run', nothing happens.

4:
Importing IE favourites into Firefox or Chrome wouldn't work (it said it had done it successfully, but no favourites were listed)
In Firefox I succeeded finally by telling IE to export its favourites to a HTML file then imported the HTML favourites file into Firefox.

I could get scenario 3 working properly, but it didn't many any difference to the other two.
To 'fix' that, if I changed the url file association in Control Panel > Default Programs:
Set Associations, url file
Changed from 'Internet Browser' to 'Internet Explorer'.
There was a third choice in that list that looked like a yellow warning shield.

I tried this forum's suggestion for resetting the url file association, restarted, but it didn't help any of the scenarios. I tried uninstalling IE9, which didn't help, then when I went to reinstall it, it wouldn't go back on (either via Windows Update or downloaded install program, and the latter wouldn't work even if I told it to close any open programs or to restart the computer to complete install).

I also tried the Windows Update Readiness tool to fix the "IE9 won't reinstall" issue. I looked up the error codes I received on various attempts to reinstall IE9 but didn't come up with anything interesting.



The computer belongs to a friend so I can't immediately try peoples' suggestions and give feedback, but any suggestions would be much appreciated. The url issue isn't user-specific.