Don't know if this helps, but this is RIM's requirements for Desktop Manager v4.2 SP2.

BlackBerry - BlackBerry - Sys Req V4-2 Pack 2

Do you have anything you can move from C to D and make room for Desktop Manager on the C drive? Might be worth a try. I think the problem may be related to having components on 2 different drives.

Also, if you haven't, do try a battery pull on the device. It might be worth shutting down Zone Alarm long enough to re-install it, also. Do you have any other security software that uses HIPS, process or registry protection?