found these issues for 98. sorry if they dont apply to ME
Your shellIconCache file in your Windows directory could be corrupted.
Rename it OldShellIconCache then reboot. It will be recreated and if this
is the problem all icons will be ok. If not you can always rename your old
file. HTH
Also:
Right-click on a blank area in the desktop, go to the "Appearance"
tab, choose "Icon" from the "Item" list, change the "Size" option to
32, click the "Apply" button.
If the icons are still fuzzy, right-click again on the desktop, go to
the "Effects" tab, checkmark "Show icons using all possible colors"
then click "Apply" again. This setting will only make a difference if
your video under the "Settings" tab is set to a High Color or True
Color mode.