If Windows Explorer folder pane is greyed out then it will work other wise try @
RaghuKL method
To resolve the problem, download folderpane.reg file, and save it to Desktop. Right-click the file and then choose Merge.
Code:
http://windowsxp.mvps.org/reg/folderpane.reg
This problem occurs if the following key is missing or contains incorrect entries:
HKEY_CLASSES_ROOT\CLSID\{EFA24E64-B078-11d0-89E4-00C04FC9E26E}