System 7.5.1 and later will not rebuild the desktop if a folder named desktop is saved to the root level of the hard disk.
However, a file named "Desktop" at the root level of the hard disk will still cause the system to rebuild the desktop once. After the system rebuilds the desktop, the system will make the "Desktop" file invisible and transform the file into an ordinary System 6.0.X Desktop file. As such, it will no longer cause desktop rebuilds.