In the mist of giving you an extra idea, and to be frank I have no idea what your problem might be, let me share what I'd do to find the cause and -eventually- fix it.
You seem to have done your Windows homework well, yet results haven't been what you expected. Something I remember doing with Windows when things didn't work (in the Windows95 era this was very common!) was rebooting in Safe Mode and see if anything looked unfamiliar.
In any case, if you still can't manage to make Windows work, before anything else, it would be interesting to make sure that the problem is not in the iPhone itself (probably nothing that an iPhone restore wouldn't fix if that's the case).
First rule of diagnosing a problem: try it on another system. The result of this simple test is going to rule out 50% of the possibilities.
If it works, the problem is in your Windows machine and you might get better luck at Super User (since our userbase here has less Windows experience, tho we have a few geeks around).
If it doesn't work, then the problem is not your Windows (stop removing stuff or it will go coo-coo!).
In that case, you might want to perform a full Restore of your iPhone. I am not familiar with Windows+iPhone combo, but don't you have to Check some preference in iTunes for that "mounts on the desktop for me to transfer pictures and videos" thing to happen? I think it was called "Enable Disk's use" on iPods, but I haven't seen that option in iPhones, but then again, Maybe on Windows this is common. Forgive my ignorance in the subject.
Anyway, just make sure your iPhone mounts on another computer's desktop (with Windows) before destroying your own Windows. For what is worth, I'm not aware of any iPhone mounting on a Mac's desktop, this has got to be a Windows thing, and this is why Super User may be better suited.
Best Answer
Your iTunes Library file might have been corrupted, a more frequent problem with the last iTunes update, especially if your computer turns off, on or restarts frequently (more then once a day).
Your exact problem happened to me 1, maybe 2 weeks back and after a bit of research on similar problems, I found that my iTunes Library file had been corrupted during a boot. All you have to do is rebuild the iTunes Library file as per Apple's instructions and it should be working perfectly again.