did you try removing the new user? or did the kids anyone else have access to the pc before you? i can't think of a reason why simply adding a new account would result in the loss of your folders.
worms don't affect files the way viruses do, they remain in active memory and duplicate themselves over and over, this can consume system resources and slow up or halt other tasks. apparently there is a new class of worm, such as Worm.ExploreZip, that also contains a malicious payload. but that doesn't seem to be whats happening in your case.
try different restore points to see if one of them works. i find that the repair console on the xp disc works for most software problems but doubt if it would do much good in this situation, could try it though if no one knows exactly what occured.
you didn't mention what the folders contained, try searching for one of the files see what comes up.