Hi Chandra and all who have this problem:
I found a sort of solution that works!
The error is really in the msenv.dll. I had an older version that I replaced with a newer one in my Program Files\Microsoft SQL SERVER\100\Tools\Binn\VSShell\Common7\IDE directory. My problem msenv.dll was dated 4/28/2008. I replaced it with one dated 7/30/2008.
The only issue is when SSMS comes up, it shows none of my databases. I had to reattach them and give them new names.
This is definitely a SQL SSMS bug.
If any of you have this problem, I would be happy to elaborate further. I'll check this forum quite often.
All the Best,