If you revert to factory settings, you'll loose EVERYTHING! All your saved files, ALL your installed programms and applications.
This is a desperate, last ditch solution that may not solve your problem in the long run.
First, check if your drive is getting to full. Do some cleanup and save seldom used documents to a DVDR. You can easily fill one or two after some normal use.
Make sure that you don't have a virus infection. Use a good AV and do a full scan.
Your wallpaper disapearing may be related to some activation porblem. Do a search for "Remove WAT".
For the missing files: Do a full system search for files created or modified the days those disapeared or where originaly saved.
If they where saved on the desktop, it's entirely possible that the desktop cleanup moved them to the old shortcut folder.
Disable the automatic desktop cleaner.
By the way, this is realy NOT modem related!
Electro, May 2011