NT

Too bad you don't mention what is exactly the policy setting (it might be the default one - the one that disables Screen Saver tab or you might have added a new feature). In the first case, it applies to the user and what you have to do is to determine if the strange behavior is user related or is sytem related (log in as another user).
Check the security settings (although, if you say that the others policy settings apply...).
The desktop registry settings can be found in HK_Curr_User\Control Panel\Desktop. Check them out, modify them manually and, if you don't want anybody else to touch them set the ACLs on them to allow only Admins and System Full control and Everybody read.