Hi, System Drive is, I believe, your 'C' drive. I don't know how it would have appeared, unless you have accidently made a desktop shortcut. If it is simple a shortcut, then you could delete it. What happens when you click on it - both right-click and left-click?
I have noticed that when I open the folder, the path reads:
C:\Documents and Settings\Luke\Desktop\%SystemDrive%\Documents and Settings\Luke ...
so it looks as though it's in a kind of 'loop.' Would this mean that I could copy the filesinto the "C:\" directory from the "%SystemDrive%" directory (even though in practise they are the same) and it has no effect?