I would like to post the fix for this issue. It turns out that Tune up utilities 2009 was auto-starting a background application that wasn’t comptabile with Aero and was causing that Aero option not to show up in the Window Color and Appearance area under Personalization. I just uninstalled Tune-Up and restarted and Aero was now back and working fine.
Hope this helps anyone who may run into this similar problem.
Thanks for the info Arris, but I ended up doing a format and clean install. I was surprised to find out that there isn’t a Repair option on the windows 2k8 install cd like windows xp. I had to do a clean install. Things seem to work now, thanks.