Just found a solution after checking event logs (I should have done that first lol ) What is interesting is what has actually happend here? I'm posting this just in case anyone else has the problem in the future.

For some bizzare reason I can no longer access the C:\ drive on my 2003 server, If I double click on C:\ or try to explore it, explorer just crashes.
I did run a Consistancy Check on the raid array before this started to happen as I was getting some strange disk errors. Its a RAID 5 array on a PERC6/i controller.

Event Log error:
Faulting application explorer.exe, version 6.0.3790.3959, faulting module shlwapi.dll, version 6.0.3790.4603, fault address 0x0000ed89.

Solution.
Faulting application explorer.exe, version 6.0.3790.3959, faulting module shlwapi.dll, version 6.0.3790.4603, fault address 0x0000ed89.

Go to My computers-> Tools-> Folder Option ->View tab.
Click on 'Restore to Default' button and check.