Drag & Drop (a file) to Desktop Icons ceased to open it, Replaced with "Move to Desktop"

I believe this may be a problem in the registry. In particular, I think this lies under HKCR.

I would like you to check some registry data manually first.

WARNING: Editing the registry can be dangerous. You are warned!

First, fire up Registry Editor (run regedit.exe from the start menu search box).

Then navigate to HKEY_CLASSES_ROOT\.exe. On the right you should see (Default) of type REG_SZ having the data exefile. Comment below and stop here if this is not on your machine.

Then also navigate to HKEY_CLASSES_ROOT\.lnk. On the right you should see (Default) of type REG_SZ having the data lnkfile. Comment below and stop here if this is not on your machine.

If you passed the above check, then you can follow the following steps to attempt to fix the problem.

WARNING: Editing the registry can be dangerous. You are warned twice!

The following fixes .exe files:

Navigate to HKEY_CLASSES_ROOT\exefile\shellex\DropHandler. On the right you should see (Default) of type REG_SZ, but may not be having the data {86C86720-42A0-1069-A2E8-08002B30309D}.

Now, select "File" -> "Export" on the menu to backup the data.

When you've done exporting the data, you should try editing the data of the item (Default). Double-click on (Default), then paste the following value {86C86720-42A0-1069-A2E8-08002B30309D} and click "OK" (or press Enter).

The following fixes .lnk (Windows shortcuts) files:

Navigate to HKEY_CLASSES_ROOT\lnkfile\shellex\DropHandler. On the right you should see (Default) of type REG_SZ, but may not be having the data {00021401-0000-0000-C000-000000000046}.

Now, select "File" -> "Export" on the menu to backup the data.

When you've done exporting the data, you should try editing the data of the item (Default). Double-click on (Default), then paste the following value {00021401-0000-0000-C000-000000000046} and click "OK" (or press Enter).

After that, close Registry Editor and restart explorer.exe. The easy way is to log off then log in.

By default, you can also drop to .bat, .cmd and some more file types. If you find that you can't also, find a working Windows 7 machine and copy the corresponding registry values.

most of the "drop targets" are handled by shell32.dll. you could try to re-register that file by issuing the command:

regsvr32 "C:\Windows\System32\shell32.dll"

then reboot and check if the problem still exists

just a wild guess, but maybe it helps