Finally I narrowed down upon the culprits causing the problems mentioned in the heading.
The trick to solve the problem is to use third party windows folder viewers.I recommend usage of 7zip's(http://www.7-zip.org/) explorer view.
Also it would be better if you could get hold of any file erasing software like Eraser(http://www.heidi.ie/eraser/download.php)
Browse each drive root(Eg :- C;\,d:\ etc) using 7zip explorer window. The culprits are autorun.inf , some *.bat file with name starting with letter 'w'.Delete them using eraser.
Also look into c:\windows\system32 folder where the culprits for disabling access to hidden folders are present.They are called tavo.exe,tavo.dll,kav0.dll,kavo.exe etc and another oddly named exes.It would be a peculiar name.So you can find it easily
To restore the hidden files option use this command in command mode
"regsvr32 /i shell32.dll"
These viruses spread usually through thumb drives.So be careful while using thumb drives in others systems.
If you have any problem in cleaning leave a message in the shoutbox or leave me a message in meebo widget or you can leave your comments here.
P.S. Attempt to do this only if you are fully are aware of the fact that you are not deleting windows system files like ntldr etc:Otherwise you will be in for bigger trouble like forced to reinstall windows.