M$ came up with this:
This behavior can occur if the following registry value has become corrupted:
This issue may occur after you install a 16-bit program, or a program that uses a 16-bit installation program, that is not Windows 2000 compliant.
WARNING: If you use Registry Editor incorrectly, you may cause serious problems that may require you to reinstall your operating system. Microsoft cannot guarantee that you can solve problems that result from using Registry Editor incorrectly. Use Registry Editor at your own risk.
Start Registry Editor (Regedt32.exe).
Locate and click the following value:
On the Edit menu, click Delete.
On the Edit menu, click Add Value.
Type VDD in the Value Name box, click REG_MULTI_SZ for the Data Type, and then click OK.
The Multi-String editor appears. Leave this entry blank and click OK.
Quit Registry Editor.
If the above steps do not work, or if you are unable to create the VDD key, it may be necessary to also delete and recreate the whole VirtualDeviceDrivers registry key.
BTW from the title of your thread I thought you'd got other probs.