Have you considered uninstalling and reinstalling iTunes?
http://support.apple.com/kb/ht1925
Yes, but I never see a backup in iTunes Edit>Preferences>Devices. I have deleted it from my hard drive, restarted, still can't get past that effor message.
This comment confuses me a bit. If you can't see a backup, what did you delete from your hard drive?
Did you try this? This is copied from the support site that Carolyn referenced above in her post.
If the issue persists, try to back up while you are logged in as a new admin user.
Use the steps below if you're not sure how to create a new user.
Windows XP, Vista, and 7
- From the Start menu, choose Control Panel.
- Open User Accounts.
- Select Create a new account and follow the instructions to complete the account setup process.
- Once the new account is created, choose Log Off from the Start menu.
- Log in to the newly created user account.
You can also try removing the backup file from this folder
Windows XP: \Documents and Settings\(username)\Application Data\Apple Computer\MobileSync\Backup\
Place it on your desktop - and see if you can backup then. You said you found this folder earlier. If you move this backup, restart your PC before you try to backup or sync again.