If the same problem occurs in another account, it suggests the message is misleading and the problem is not with My Documents itself.
That is unless you have changed the path c:\Documents and Settings which is common to all accounts.
It sounds as though there is a registry key set with corrupt information somewhere that you haven't found yet.
Something you could try is a complete removal of iTunes according to the following method. I have also included instructions for installer clean up which you should do if one of the uninstalls fails. I am guessing that the iTunes uninstall might fail with a similar message.
== uninstall with cleanup ==
Download a fresh copy of iTunes and the stand alone version of Quicktime
http://www.apple.com/quicktime/download/win.html
http://www.apple.com/itunes/download/
Download and install Microsoft Installer cleanup utility, there are instructions on the page as well as the download. Note that what you download is the installer not the program – you have to run it to install the program
http://support.microsoft.com/kb/290301/
Now use the following method to remove iTunes and its components:
XP
http://support.apple.com/kb/HT1925
Vista
http://support.apple.com/kb/HT1923
If you hit a problem with one of the uninstalls don't worry, carry on with the deleting of files and folders as directed in the method.
When you get to deleting Quicktime files in the system32 folder as advised in the method, you can delete and file or folder called Quicktime.
Restart your PC.
Run the Microsoft Installer Cleanup Utility. (Start > All Programs > Windows Install Clean Up)
Remove any references you find to the programs you removed - strictly speaking you only need to worry about those programs where the uninstall failed.
restart your PC
Install the stand alone Quicktime and check that it works.
If it does, install iTunes.
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