Here is an easy fix. After performing an in-place upgrade (repair installation) of a Windows XP damaged by a virus, the user had this error. There was a red circle with an X in the middle by the clock.  Double-clicking on the red circle X brings up an error that starts with "You have exceeded your profile storage space". There were some more information. The pop-up window then proceeded to list a bunch of file in the My Documents folder.

The fix is very easy. Open the registry editor (Windows Key + r -> regedit) and browse to the hive HKEY_CURRENT_USER \ Software \ Microsoft \ Windows \ CurrentVersion \ Policies \ System. Then change the registry key EnableProfileQuota to 0. The problem should immediately disappear.

This is a feature for workplace computers which are managed by a central server. This is not a feature for home users. In this case, it appears some malware made the change just to make life more annoying and thus making removal more difficult.