When selecting Actions | Open with Windows Explorer using client integration in SharePoint from a seamless Internet Explorer session the following error occurs:

Windows cannot find '(null)'. Make sure you typed the name correctly, and then try again. To search for a file, click the Start button, and then click Search.

This issue does not occur with IE6

SharePoint relies on the Windows Explorer shell to provide the Open with Windows Explorer feature. Currently the only supported solution is to either allow users access to the complete desktop experience or to modify the behaviour of SharePoint (disable client integration). There is no resolution to this, although there are a number of possible workarounds:

1) Revert to Internet Explorer 6

2) Disable SharePoint Client Integration
This will disable all client integration features as there is no supported way to disable individual components of the client integration package.

3) Possible Windows Server 2008 /AlternateShellStartup switch (untested)
As per http://support.microsoft.com/kb/951048

Start the Runonce.exe file together with the /AlternateShellStartup switch
Some applications that rely on the Explorer.exe file may run in the TS RemoteApp session if you add the Runonce.exe file to a user’s logon script. To do this, follow these steps:
- In the server GPMC, click Local Computer Policy, click Computer Configuration, and then click Windows Settings.
- Click Scripts (Logon/Logoff), and then double-click Logon.
- Click Add.
- In the Script name box, type runonce.exe.
- In the Script parameters box, type /AlternateShellStartup.
- Click OK two times.

Error: Windows cannot find '(null)' ... when Launching Internet Explorer 7 in Explorer Mode
http://support.citrix.com/article/CTX112195

An application does not start in a Windows Server 2008 Terminal Services RemoteApp session
http://support.microsoft.com/kb/951048

Plan authentication settings for Web applications in Office SharePoint Server
http://technet.microsoft.com/en-us/library/cc263304.aspx

Client integration
You can disable client integration, which removes features that start client applications. This is the optimal configuration for some scenarios, such as publishing read-only content to the Web for anonymous access. Additionally, if you select ASP.NET forms authentication or Web Single Sign-On (SSO) authentication, client integration is set to No by default.

When client integration is disabled, sites behave in the following ways:
- Links that start client applications are not visible.
- Documents are opened in the browser. Documents cannot be opened by client applications.
- Users cannot edit documents on the site directly from the client applications. However, users can download the document, edit the document locally, and then upload the document.