What this sounds like to me, is the 'default' operation for clicking on an item has somehow been changed to the context-menu option of 'create shortcut'. Now, I'm sure it's easily changed back in the registry somewhere.. but I'm not sure where. I'll get back to you if I find anything.
Edit: You're in luck.
At a run line, type the following:
regsvr32 /i shell32
What I believe this does is re-installs and therefore resets the windows shell to its default settings. I have not tested this myself, so beware of that. Let me know how it goes!