Okay... found it after too much time trying various things related to corrupt 
prefs, registry entries etc.

Turns out, Microsoft Office 2007 Groove is the culprit. If you uninstall just 
Groove (Add/Remove Programs, select Office, click "Modify", then turn off 
Groove and "Continue") everything is good again.

One tip I saw said simply uncheck "Compatibility mode: Windows 2000" in the 
IDE.exe property sheet, but I could not get any results with that, and every 
time I looked, the checkbox had re-checked itself.

Removing Groove seems to be the answer.
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