After installing updates for windows vista, some people experiencing problem to rename, move or create folder.
After some research on the web, it seem that one of the update KB938979 have cause this problems. The updates deleted some of the important registry entries needed by windows vista, thus uninstalling the updates won't do you any good.
The solution would be add the deleted registry back to its original place. However, it's complicated for those who are not well verse with registry editing and any mistake would be damaging.
BEFORE APPLYING THE FIX, PLEASE BACKUP YOUR REGISTRY
1. registry fix for 32bits vista - http://www.vlite.net/files/fd32.zip
2. registry fix for 64bits vista - http://www.vlite.net/files/fd64.zip
After you unzip the files, double click on the registry file to add back the missing registry.