"Show Hidden Files" not working anymore.....

Probably you may be infected by a virus, or maybe you were once, and the registry didn't get properly restored. There are some ways to clear this stuff, I have given them in the order as to fatal is the problem in your case. Try out in the given sequence.

1. This next text is from my own registry. Copy the whole text in notepad which is given below in bold then save the file by any name but change the extension to .reg in the local drive where your Operating System is installed, and then double-click it, it will display a message that "Are you sure you want to add the information stored in the file to the registry". Click yes, and then OK.

The text is as follows:-

Windows Registry Editor Version 5.00

[HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\Explorer\Advanced\Folder\Hidden]
"Text"="@shell32.dll,-30499"
"Type"="group" "Bitmap"=hex(2):25,00,53,00,79,00,73,00,74,00,65,00,6d,00,52,00,6f,00,6f,00,74,\
00,25,00,5c,00,73,00,79,00,73,00,74,00,65,00,6d,00,33,00,32,00,5c,00,53,00,\
48,00,45,00,4c,00,4c,00,33,00,32,00,2e,00,64,00,6c,00,6c,00,2c,00,34,00,00,\
00
"HelpID"="shell.hlp#51131"

[HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\Explorer\Advanced\Folder\Hidden\NOHIDDEN]
"RegPath"="Software\\Microsoft\\Windows\\CurrentVersion\\Explorer\\Advanced"
"Text"="@shell32.dll,-30501"
"Type"="radio"
"CheckedValue"=dword:00000002
"ValueName"="Hidden"
"DefaultValue"=dword:00000002
"HKeyRoot"=dword:80000001
"HelpID"="shell.hlp#51104"

[HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\Explorer\Advanced\Folder\Hidden\SHOWALL]
"RegPath"="Software\\Microsoft\\Windows\\CurrentVersion\\Explorer\\Advanced"
"Text"="@shell32.dll,-30500"
"Type"="radio"
"CheckedValue"=dword:00000001
"ValueName"="Hidden"
"DefaultValue"=dword:00000002
"HKeyRoot"=dword:80000001
"HelpID"="shell.hlp#51105"

2. I came across one software while surfing for the same problem, there is this software named Smart Antivirus, a very samll one. You can download it from http://technize.com/content/downloads/smart_av.exe It is a portable version which means you can keep it your flash drive also and using this antivirus, please restore your Windows settings and your show hidden files and folders will be set to default.

Now , this method  should only be used if none of the above are working.

3. What you have to do is, you should open the registry, but remember to back it up. You can make a restore point in system restore, got to Start >> All Programs >>Accessories >> System Tools >> System Restore and then follow the instructions and create a restore point, or just open the registry and export the whole thing, or export some selected keys.
Start >> Run >> (type) regedit >> (rightclick on the little my computer icon, and export the whole thing.) find this key:

HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Explorer\Advanced
Go to the rightside of the window, where the values are. Find the value "Hidden". Rightclick it and modify it to 1.

The only catch in this method is that after you are done with the above procedure, the hidden files would be permanently shown untill you again put the value back to zero inplace of 1.

Remember the threat of a possible virus. I read about one of the so called worm32 that did something like this only.

If you still have any problems regarding the above matter, then you can surely leave a comment.
Please note:- Create a system restore point before doing all this stuff.