Solved Cursor flashes blue circle ("Working in background") every second after System Restore

Microsoft Windows
Version 22H2 (OS Build 22621.1992)

Hi everyone. A few days ago I couldn't open a spreadsheet I made because I suddenly didn't have permission. I normally had no trouble opening it and run into this problem once in a while accessing a file or directory, so I decided to take ownership of my entire C: drive, which turned out to be a big mistake. I tried to change everything back to TrustedInstaller but that didn't really work -- certain simple programs like Notepad and Calculator gave me error messages. Thankfully I had a restore point a couple of hours before I screwed things up.

I performed a system restore yesterday, and now everything seems back to normal with two exceptions. The cursor now flashes that blue circle about every second. I made a YouTube video to show what's happening. Under mouse settings, it's described as "Working in background." I can simply change the cursor so it matches the standard white one, but that feels like I might be ignoring a problem.

The second thing that happens is more concerning. I entered Safe Mode to see if the cursor still flashes (it doesn't) -- but now nothing happens when I click the Start button, and every 34 seconds, I get the following error message:
***
explorer.exe - System Error
The system detected an overrun of a stack-based buffer in this application. This overrun could potentially allow a malicious user to gain control of this application.
***
Full scans in Windows Defender, Bitdefender, and Malwarebytes showed nothing wrong. I also tried the following commands in a command prompt with administrator privileges, and all completed successfully:

sfc /scannow
dism.exe /Online /cleanup-image /scanhealth
dism.exe /Online /cleanup-image /restorehealth
dism.exe /Online /cleanup-image /startcomponentcleanup

I tried everything that applies in this link, but nothing worked. I tried killing as many "culprit tasks" as I could, but some essential ones wouldn't close, or others would close then start back up again.

Any help anyone could provide would be greatly appreciated!

I would normally suggest a repair install, but since we do not know what is going on in the background with the blue circle, I would think there is a chance it might fail. Guess you could try it first and see. You may well be facing a clean install or reset in order to straighten it out completely. Never, ever, take mass ownership of system files.

Repair Install Windows 11 with an In-place Upgrade Tutorial

Clean Install Windows 11 Tutorial

glasskuter said:

I would normally suggest a repair install, but since we do not know what is going on in the background with the blue circle, I would think there is a chance it might fail. Guess you could try it first and see. You may well be facing a clean install or reset in order to straighten it out completely. Never, ever, take mass ownership of system files.

Repair Install Windows 11 with an In-place Upgrade Tutorial

Clean Install Windows 11 Tutorial

Click to expand...

Lesson learned the hard way. I'm verifying the integrity of an overnight backup I made, so I'll follow up if/when everything goes sideways.

Also thanks for the links. I don't have the 25909 Canary build, so I guess my only option is to follow the ISO/USB installation instructions...

Repair install completed successfully. The blue circle no longer appears about once every second.

I'm still having problems in Safe Mode, though. I can't open the start menu, and when I right click it and select "Run," I get the following error:

"This operation has been cancelled due to restrictions in effect on this computer. Please contact your systems administrator."

Is there anything else I can do besides performing a new installation of Windows 11?

cinematic6436 said:

I'm still having problems in Safe Mode...,"This operation has been cancelled due to restrictions in effect on this computer

Click to expand...

My opinion is you will probably encounter that same notice in other areas of Windows as well. When you took ownership of the the entire drive, both system and trusted installer owned permissions went haywire.
I found this article listing 3 solutions that may help but I have never tried it myself. To 100% know that everything is as it should be I would clean install, but that's just me.
How to reset all User Permissions to default in Windows 11/10

glasskuter said:

My opinion is you will probably encounter that same notice in other areas of Windows as well. When you took ownership of the the entire drive, both system and trusted installer owned permissions went haywire.
I found this article listing 3 solutions that may help but I have never tried it myself. To 100% know that everything is as it should be I would clean install, but that's just me.
How to reset all User Permissions to default in Windows 11/10

Click to expand...

Good news -- after following the advice in that link you found and running Tweaking.com - Windows Repair's "Permissions only" option, practicaly everything seems to be back to normal in Safe Mode -- the start menu now opens, and everything on it can be accessed, the sole exception being Windows Terminal.

When I start Windows 11 normally & try to open Windows Terminal or Windows Terminal (Admin), the error message reads "The file cannot be accessed by the system." In Safe Mode, the error message reads "The application cannot be started. Try reinstalling the application to fix the problem."

Would restoring wt.exe from a recent backup help? Or is there another way to possibly fix this?

cinematic6436 said:

Good news -- after following the advice in that link you found and running Tweaking.com - Windows Repair's "Permissions only" option, practicaly everything seems to be back to normal in Safe Mode -- the start menu now opens, and everything on it can be accessed, the sole exception being Windows Terminal.

When I start Windows 11 normally & try to open Windows Terminal or Windows Terminal (Admin), the error message reads "The file cannot be accessed by the system." In Safe Mode, the error message reads "The application cannot be started. Try reinstalling the application to fix the problem."

Would restoring wt.exe from a recent backup help? Or is there another way to possibly fix this?

Click to expand...

Just reinstalled Windows Terminal from the Microsoft Store. Everything apparently works as it should now. Apologies for asking this question -- I didn't know it could simply be reinstalled from the store!

Also thanks again for the help!