There are a couple of things we would try.
First, rebuild the hard disk's desktop file by holding down the Command and
Option keys while you start up the system. Hold both keys down until the
dialog box appears asking you to confirm the desktop rebuild.
If that does not help, boot from a locked System Tools diskette and try to
throw away the files, folders, and the System folder. Then, reinstall the
System using the Installer. Another solution might be holding the option key
down while throwing something into the trash
Once you have a re-installed the System file, do a file-by-file backup of
the drive, re-initializing the drive, and then restoring the data and
applications.