Icons disappear when dragging

[martinlink]

Basically it started randomly about 4-5 days ago. Dragging items anywhere (desktop, explorer ...) makes the icons disappear. It's almost as if "Adjust for best performance" was selected from performance options, but it's not! Everything is ticked in the options; I tried unticking and ticking again, but it didn't fix it.

What might be causing this and how should I try fixing it?

Thanks!