Cannot create a system restore point (0x80070005 Access Denied) Windows 7 x64 SP1

When creating a System Restore point manually, I get a nondescript error message:

The restore point could not be created for the following reason:

Access is denied. (0x80070005)

I've been troubleshooting for hours. I have...

• Uninstalled my virus scanner (Microsoft Security Essentials)
• Disabled System Restore and rebooted (to clear out all restore point files)
• Rebooted in safe modes
• Tried to find which file/folder might have access denied (no clues)
  • Searched Event Logs
  • Run SysInternals ProcMon
• Attempted to give "Full Control" security permissions recursively to "C:\System Volume Information" for SYSTEM, LOCAL_SERVICE, SERVICE, plus my user account.

No luck at all.

I eventually discovered Windows is able to create Restore Points automatically:

• Since I no longer had any restore points (due to troubleshooting) I decided to run Windows Backup(**)... Low and behold, a system restore point got created!

So it seems I have a workaround. Still, it would be great to get to the bottom of this.

These are the only system changes I can think of over the last few months. They seem like long-shots, but could they be relevant?

• From Microsoft Update, I installed and ran a "Disk Cleanup" plugin that clears out old Service Pack update stuff
• I'd previously granted "Full Control" security permissions recursively to "C:\System Volume Information" for my user account, to snoop around. Could I have overwritten some important permission?

(**) When I then asked Windows Backup to delete my backup, it said "Access is denied. (0x80070005)" Arrrgh! :-) Fortunately I can do this myself. But could this be another clue?

UPDATE: I also cannot revert to a restore point: same error given.

Workaround: restore after booting in Safe Mode (NB: cannot be undone)

I've just fixed this issue on a Windows 7 laptop. Make sure SYSTEM and Administrators group has read and write access to C:\system volume information and sub folders! especially SPP. Any assistance on checking or making this change, let me know.