wtf is wrong with sp2

Is this the correct board for this?
We're seeing a really unusual problem after installing
sp2.
I know it is becaus of sp2 because we removed it, tested,
reinstalled it and retested.

What happens is that some programs return an error
messages stating that a file was not found. The path
that is quoted is missing a part of a folder name that
has a space in it. Usually something like: c:\documents
and settings\blahBlahBlah\... is shown as
settings\blahBlahBlah.
Turning on windows 95 compatability seems to fix this.
Another problem is the windows media player doesn't work
right. If you open a folder with media files and double
click a file (I'm guessing the file has to have a space
in the path name) the media player starts up and behaves
as though a file was not selected.
I've tried this with excel documents, but that works
fine, so I dont know what is going on.
Has anyone else seen/heard of anything like this?

..