It is possible to set your desktop to display the contents of your home
folder and this appears to be what has gone wrong. The simplest way to
check is to install ailurus (a system tweak utility) from
www.getdeb.net/updates/Ubuntu/11.04/?q=ailurus

Once running go to System Settings (it should start up on this screen)
and select Desktop from the list on the left. In the Advance settings
section, there is an option "Display content of your home folder on
desktop" which should be unticked. If you change this, you need to log
out and back in to restart Gnome for it to take effect.

did as you said, (great tip by the way) and it was unchecked. so i checked it,
logged out, then unchecked it, logged out, still the same???

Do you still have these folders in your Home folder or are these
copies of that data ?

have a home folder and same on my desktop. when i make a change on either, it
shows on the other.

That would happen if the folder on your desktop is actually a link to
the one in /home - if you right click on the folder on the desktop and
select 'Properties' what do you see against 'Type:' ?

If it mentions anything to do with 'link' then it's not the actual
folder but if it says 'folder (inode/directory)' then it is a folder
in all the sense of the word.

Do the same for the same folder you see inside /home - and if both are
bone-fide folders then you have some sort of cross-linking going on
which would indicate file system errors. Cross linking isn't good news
but before trying to sort out make a backup of the contents of /home
as fixing may well delete both !

Hopefully one or other 'folder' may turn out to be a link !!

both are folders, guess ill wait til 1110 comes out as all else ok. wonder if 64
bit had anything to do with it, as all my other ubuntu 32 bit have never had
this happen?

Since both are folders and changes to one appear in the other then it
does appear as if there's some cross-linking going on here. Don't
expect it to be a 64bit vs 32bit issue, more file corruption and as
long as that's all that's happened then just a curiosity. I'd be more
fastidious with the backing up though just in case it's a sign of
other things about to go wrong. It's not a good sign to have folders
that do this !