I've looked on the multitude of questions related to Desktop icons in Windows 7 but I haven't found the answer I'm looking for yet.
The goal is to have Desktop icons on the Public folder such that all users see them by default. However, if a user wants to hide all the shortcuts from the Public Desktop, he should be able to.
The last part I haven't found a way. So far it seems to be a "all or nothing" situation. Either you have the shortcuts on a per user basis or having them in the Public/Desktop folder forces everyone to have them visible without being able to change this themselves.
Basically I want the users to be able to disable the integration between their Desktop and the Public one, effectively only seeing what they have in their C:\Users\<User>\Desktop folder.
Edit: Focus on the ability to disable the integration of the User's and Public Desktop.
Best Answer
Considering the fact that it's a Public folder shared for everyone, any change by one user is going to reflect on all computers.
The only way to maintain what you want to do is as you suggested; on a per-user basis.