Hi, cool ty for the suggestion. I will give it a try. I'm pretty sure I'm having a problem with wow64 (windows 32 bit emulator though). I have tried the system restore already but it didn't work.
I've also tried stopping all start up items (via msconfig), and all services (via msconfig) and booted into windows safe mode. Again same results. Only ie 64 bit starts up (of course no networking so it fails, but atleast a window comes up).
I will try the sfc 3 times and report back.
Updates(Reporting back):
I tried system restore again to an earlier one and machine failed to even boot

I used a combination of windows repair? and sfc (and copying corrupted files back to windows, Thank you Brink!) and now have it back to my state earlier. i.e. no 32 bit apps seem to run. I've run sfc 3 or 4 times now in windows safe mode dos window and from a dos shell on the windows desktop. I'm hesitant to try anything to do with windows restore now and if that's my only option. I guess I'm stuck with only 64 bit apps on my Windows 7 machine
Opps didn't follow your instructions complete, now going back to full disk virus scan, then will run sfc 3 times and then try and find Ccleaner (didn't see anything in lower left). I hope it's 64 bit app cuz I'm pretty sure it won't run if it's 32 bit app. Anyhow will report back in again on success or no results or complete failure (if this happens it will be a while before I can report back lol cuz my machine will be down and out!)
Just tried to run SF diagnostic tool and it won't run either. Was hoping I could gather more information to help diagnose problem

Is there a 64 bit version of the tool?
Update 6/10/2012
-2 Full MSE scans, 2 sfc nothing found by either.
Update 6/11/2012
- Ran 3 sfc nothing found
- schedule scandisk /F /R on reboot
- Set using msconfig no start up items, all non-microsoft drivers disabled
- rebooted and began scandisk /F /R
- Ran 3 sfc nothing found (other sites say it's important to run it 3 times so I'm doing it)
-
Problem still exists, 32 bit applications never seem to start, they don't crash, don't appear in process monitor, and window for application never shows up. 64 bit applications work without a problem. I will then try and replace the wow64.dll, wow64sys.dll and wow64Cpu.dll, then if I still have problems, muck with win32k.sys and registry. After that I think I have no choice but reinstall win7? I'll continue to monitor this thread for a few days before I do a reinstall of win7 in case someone has some suggestions.
Update 6/15/2012
Not sure what fixed it since nothing was reporting errors as fixed or problem found, but I did try to download Malware, it didn't run of course since it's 32 bit. So then I tried to boot off a different os to run Malware. Wasn't able to get it to run in DOS, and failed attempt to install another windows 7 volume, and after all that I booted back in to search for windows 7 install problems, but voila my machine got fixed! 32 bit apps now run!
Update 6/17/2012
Apparently my problem still exists. As everyone seems to suggest that I have malware, I was finally able to run the Malware installer (32 bit), when my machine came back up. Bad news, Malware wanted me to reboot. So reboot I did, and my problem came back. 32 bit programs don't run. Malware doesn't run.

I tried to boot off my failed windows 7 again to check the error, and then rebooted back into my current volume (to use the web to research) and voila! Machine fixed again? 32 bit apps run. Anyhow long story short, I seem to have to boot into the failed partition first and then boot my other partition and it works. I have run many sfc's as well as Malware full scans and I still have the problem. For now I will live with the manual boot to failed volumne then boot to other volume to get things to work.