After having an incredibly frustrating morning where my machine had decided to suddenly start hanging randomly (before I get any flames, this is actually a pretty rare on Win2K3), I finally found out what was causing my development box (running Windows 2003 Server Standard) to completely flip out: I had simply changed the menu delay using TweakUI to 0 (fastest).

The fix: Change the Menu Delay to 1 (next to fastest).

Silly as it sounds, slowing down the delay fixed my problem - everything went back to normal. I did a quick search in Product Studio (the tool we use to track bugs at Microsoft) after I figured out what was going on just to make sure it had been reported - alas, it already had a bug filed for it.

Just as an FYI, the same thing happens if you change the HKEY_CURRENT_USER\Control Panel\desktop\MenuShowDelay registry setting to 0.