My Icons, i.e. the ".ico" files, suddenly started to show up in either 8 bits or as black blocks. Here is how they look like http://img190.imageshack.us/img190/6573/icons.png This is just the case with the ".ico" files when i apply these icons to any folder or shortcut they appear fine.

This is an odd issue. I did some quick research but can't find anyone else with the same problem. Are you still experiencing this behavior? If it's still happening, I suggest you report it in the Windows 7 comments thread so Microsoft will know about it. -Nick

Yap the trouble is still on. i found out one solution but i wont prefer it. When i check the option called "Always show icons, not thumbnail" from the FOLDER AND SEARCH OPTIONS the problem disappears but then i cant get any picture or movie previews.