Windows 7 Compatibility Tab settings not applying after SP1 installed

I'm running Windows 7 Enterprise 32 bit on a domain. After I installed SP1 on all our Windows 7 boxes the compatibility tab has stopped working on all the Windows 7 PCs. Under the properties of any executable file I can see the compatibility tab but when I check off any of the settings and hit apply the settings are not sticking. I tried checking off all the settings, or just some, different combinations but none of them apply. If I check the compatibility tab after I hit OK or Apply all the settings are unchecked.

I also noticed that when I browse any of the following keys in the registry,

HKEY_CURRENT_USER\Software\Microsoft\Windows NT\CurrentVersion\AppCompatFlags\Layers
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows NT\CurrentVersion\AppCompatFlags\Layers

I can't delete any of the string values in the Layers key or the key itself. I can see all the previous string value entries added before I installed SP1 but I can't delete any of them, modify them or add new ones. I'm logged in as an administrator, running regedit as an administrator...I've also changed the permission of both those Layers keys to the everyone group, given the everyone group full control to the key and sub keys and made the everyone group owner of the key and applied all those permission to the Layers key and sub keys...a bit desperate to figure this one out.

I need to install an older program that can only be installed as Windows XP SP3 compatibility mode.

Has anyone else come across this after upgrading to SP1?