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I was just looking through the knowledge base. There are two pages which basically say the same thing. One says to back up the registry key which you end up deleting and the other doesn't. Guess which one I found first and gave to you. I'm glad you backed up your registry. I would definitely hold onto it. You might try to restore the registry and then save only the VolumeCaches section of it since there is no need to keep the whole registry backup.
I'm looking at the registry key right now and it doesn't seem to say much so I'm figuring it just turns that part right off when you delete it.
If it was me I'd try restoring the registry and see what happens. You know how to fix it now so I don't think there is anything to lose. But before you do check to see if windows has added that key back into the registry. This would indicate that it has set it back up and perhaps it will start working again. My opinion is that it has been turned off and that's all we can do about it.
FYI my registry has three keys in Compress old files
(default) REG_SZ {B50F5260-0C21-11D2-AB56-00A0C9082678}
Priority REG_DWORD 0x0000012c (300)
StateFlags REG_DWORD 0x00000000 (0)
I have no idea what these values actually do and I can't recommend you change yours to these (especially the default one) seeing as I have no way to tell what effect they'll have (but if you're feeling crazy go for it).
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