Windows 7 - Visual C++ Runtime Library Application Error

I have scoured the forum without finding my crazy situation anywhere. Maybe someone can help? I have 2 internal hard drives and 2 external hard drives. I can copy and move any files between them. If I try to copy FOLDERS I get a popup that "this application has requested the Runtime to terminate it in an unusual way" then a popup that explorer has stopped working, then that explorer is restarting. I can MOVE FOLDERS but not COPY them. I can copy a folder onto the desktop but I cant then copy it into another drive. I have tried system restore, didnt fix it. I tried installing windows over the existing system, but it made no difference. I installed visual basic 2008 and 2010. Checked for viruses and other malware. I ran scannow from the admin command prompt ,but it found no problem. From the error reports I found this:
Description
Faulting Application Path: C:\Windows\explorer.exe

Problem signature
Problem Event Name: APPCRASH
Application Name: Explorer.EXE
Application Version: 6.1.7600.16385
Application Timestamp: 4a5bc60d
Fault Module Name: msvcrt.dll
Fault Module Version: 7.0.7600.16385
Fault Module Timestamp: 4a5bda6f
Exception Code: 40000015
Exception Offset: 00056202
OS Version: 6.1.7600.2.0.0.768.3
Locale ID: 1033
Additional Information 1: 7511
Additional Information 2: 7511679ffe7ea8631ee6f37f36044d38
Additional Information 3: f0af
Additional Information 4: f0af7444c0883d780e7ef19aaf39924d

Extra information about the problem
Bucket ID: 1373270905
Before I give in and format, does anyone have a clue what is going on? Running windows 7 32 home premium, intel core2 E6750, gigabyte EP35, DDR2 2gig kingston, AlbatronGeforce 9600GT. cheers