From the looks of the log file it is either something wrong with the file system or the permissions are screwed.
First thing to do is a chkdsk on the drive and have it check for bad sectors as well.
Had a customer today whos system was going bonkers, no infections and everything I found wrong seemed to be hard drive related, thought for sure she had bad sectors. So did a chkdsk and had it look for bad sectors, it found no bad sectors but did find problems with the file system which it fixed, then at reboot everything was working like it should.
I am still replacing the drive later this week as it is an old drive and the smart status is showing it isnt in the best of health, plus the file system should just mess up out of no where.
So what I would do on yours is a chkdsk first, then once done see if you can get into safe mode and if you can run my repairs, all of them and it should fix the permissions and so on.
For it to say Windows isnt a valid folder means a bad file system or corrupted permissions, also the permissions are stored in the file system, so that chkdsk is the best first step.
Shane