icons missing from Desktop

Hi. I am having a very strange problem with my Sony VAIO. Coule of days back, I got a virus which would not let me do anything but to buy their softwere for computer maintenance. I decided to do System Restore on an earlier date. It was done successfully but with a probelm. I had tons of stuff including folders, doc files, pics, excel sheet etc on my Desktop. After the system restore all icons disappeard from DT. I had backups of some of the files so I tried to copy my files on the desktop but it gives me msg that file already exists but there is no file which i can see. I have tried everything possible, includind right click, view, show icons, refreshing desktop, checking the file properties if they are hidden, they are not. I can see the doc files when I open MS-Word and open files from desktop and I can save on Desktop but on Desktop I cannot see those files. I have other icons visible on the DT.

I am using Windows 7 home premium. Any clues what is going on and how can it be fixed. I have files on DT but I cant see them Even after I have copied from backup to DT.

I need serious help please. Thanks in advance.
Regards
Nasir

Thanks Mike for the reply. I downloaded and scanned the system. It found two infections, Trojan.FakeAlert and PUM.Bad.Proxy. I cleaned both of them. Here is the log

Malwarebytes' Anti-Malware 1.50.1.1100
www.malwarebytes.org
Database version: 6458
Windows 6.1.7600
Internet Explorer 8.0.7600.16385
4/27/2011 4:03:10 PM
mbam-log-2011-04-27 (16-03-10).txt
Scan type: Full scan (C:\|Q:\|)
Objects scanned: 323820
Time elapsed: 50 minute(s), 38 second(s)
Memory Processes Infected: 0
Memory Modules Infected: 0
Registry Keys Infected: 1
Registry Values Infected: 1
Registry Data Items Infected: 0
Folders Infected: 0
Files Infected: 0
Memory Processes Infected:
(No malicious items detected)
Memory Modules Infected:
(No malicious items detected)
Registry Keys Infected:
HKEY_CURRENT_USER\SOFTWARE\g043oqxanu (Trojan.FakeAlert) -> Quarantined and deleted successfully.
Registry Values Infected:
HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Internet Settings\ProxyServer (PUM.Bad.Proxy) -> Value: ProxyServer -> Quarantined and deleted successfully.
Registry Data Items Infected:
(No malicious items detected)
Folders Infected:
(No malicious items detected)
Files Infected:
(No malicious items detected)

Did almost everything. Restore most of the defaults. Still I cant see the files and folders on the DT. When I copy a new one, it tells me that it already exists but cant see. When I ran Antimalaware, it scanned all the files including the ones on the Desktop which are invisible. Anythiing else which you can think of.

Regards
Nasir

Restored manully as well. nothing works. There has to be a solution. Folders are there but I cant see them on my DT.

yeh. the first thing i did that ... right click, view, show icons... I just made a backup on a cd with windows backup utility, all the folders show in backup selection but in lighter color then in normal like a hidden folder. I have changed the attribute from the command mode to -h.. didnt work.. very strange..