I've got the same bug, the show/hide button simply disappears and the frame is permanently locked on. I don't know what causes it, but I do know that the tools -> show toolbars -> standard thing doesn't work. That button isn't part of the standard toolbar at all (the standard toolbar is below this button which is normally in top right of the window as shown in the second printscreen). I really don't understand this bug, I got it randomly some time ago and couldn't get rid of it for weeks until it randomly disappeared, now I've got it again. It was fine yesterday and as far as I know the only thing I've done different today was inserting my U3 memory stick (surely shouldn't affect messenger) when windows started up and boom, the frames reappear. I've tried reinstalling and it doesn't help, any ideas?
Edit: I should have set my gf at sorting this problem sooner, I've been looking around the web for hours and she finds it in 10 minutes
Anyway, if others have the same problem this is the solution:
1) Find a computer or a user account where the button displays
2) Open Files and Settings Transfer Wizard (All programs -> Accessories -> System tools)
3) Choose Old computer on the user/computer with the button visible then choose whatever method you prefer to save the settings
4) Choose to save settings only and tick the box to allow you to edit which settings are copied, click next
5) Remove all settings except the one labeled "Accessibility" and continue to save the settings
Get back to the user/computer that doesn't display the picture and then use the wizard to restore the data you saved previously. I don't quite get why this works, there was no visible difference between the accessibility options on the two users, but it still works. I'm attaching the files saved during steps 1-5 for me as they're small and might help if you don't have a second computer/user. I don't know whether it makes any difference, but they were made on xp sp2.