No, a grey icon is not normal (only if you have some graphic card issue).
I'm quite confused with your problem and I believe that there is somewhere an information (which you might think has nothing to do with LW) that we havn't heard so far and being the possible reason for your problem.
Try one more thing; right click the LW icone on your desktop, go to properties and then to Compatibility. There you change to Compatibility to either Windows 2000 or Windows NT (try one after the other if the first doesn't work out).
Did you have any installation of programs, updates of programs or added hardware to your computer prior to LW not more working??
