@korona - Nope, that didn't fix it. Thanks for your suggestion, though.
More research in ProcMon shows this interesting tidbit, not sure if it is related:
8:45:46.6790857 AM WindowsFormsApplication1.vshost.exe 7684 FASTIO_CHECK_IF_POSSIBLE C:\WINXP\Microsoft.NET\Framework\v2.0.50727\CONFIG\enterprisesec.config.cch FAST IO DISALLOWED Operation: Read, Offset: 48, Length: 12
8:45:46.6793569 AM WindowsFormsApplication1.vshost.exe 7684 ReadFile C:\WINXP\Microsoft.NET\Framework\v2.0.50727\CONFIG\enterprisesec.config.cch FAST IO DISALLOWED Offset: 508, Length: 12
This repeats several times, like hundreds of times, then it switches to a different path:
8:45:46.7470314 AM WindowsFormsApplication1.vshost.exe 7684 FASTIO_CHECK_IF_POSSIBLE D:\documents and settings\myusername\Application Data\Microsoft\CLR Security Config\v2.0.50727.42\security.config.cch FAST IO DISALLOWED Operation: Read, Offset: 48, Length: 12
8:45:46.7472187 AM WindowsFormsApplication1.vshost.exe 7684 ReadFile D:\documents and settings\myusername\Application Data\Microsoft\CLR Security Config\v2.0.50727.42\security.config.cch FAST IO DISALLOWED Offset: 508, Length: 12
And repeats again many more times, with slight changes in the offset each iteration. Maybe unrelated, but....