One of the Windows 7 machines in my house had a problem recently. Non-admins couldn’t log in, and there was a message saying that the System Event Notification Service wasn’t running. I could log in as admin, but couldn’t escalate to run things as Administrator. The error “The system could not find the environment option that was entered” would appear.
The standard web searches weren’t my friend, but I eventually found that if I started in Safe Mode, I could run a Command Prompt as Administrator and disable UAC. Then I could log in as me (with admin privileges), and run setup.exe from my Windows 7 disk and do an Upgrade to repair my system.