After Update: Desktop Icons scrambled and restricted

Just installed the update that came this afternoon (Wed, 15 July '09). It restarted my MacBook Pro, and all of the desktop icons were piled into the upper left-hand quadrant of the screen. When I attempted to drag them back to the locations they previously occupied, I was (and continue to be!) unable to drag them to anywhere in the lower half of the desktop. When I drop them where I want them, they just glide right back to their previous wrong location.

WHAT GIVES?????????????? Bad Update??? How to fix?

This is the kind of stuff I expect (and experienced) from a PC, not from my Mac!

Thanks for your help!