||We were having this problem with 9.3. There are several things to try if you're having this problem, though none are very scientific. So if any developers out there could comment on the nuts and bolts of this issue, that would be very helpful.
1. If you have dual monitors, make sure the values for the screen position aren't negative. So for monitor 1 values should be 0,0 and for monitor 2 values should be greater than or equal to zero.
2. Use ArcMap on your primary display only.
3. Open ArcCatalog and minimize, then maximize the application, then try opening the layer properties in ArcMap.
4. As a last resort you can rebuild your profile in Windows.