Can you try to rename your Esri folder in your Application Data folder and Registry?
Esri Folder:
1) In Windows 7: Navigate to C:\Users\<your_username>\AppData\Roaming\ESRI.
In Windows XP: Navigate to C:\Documents and Settings\<Your Userprofile>\Application Data\ESRI.
Note: If you can't see the Application Data folder, go to Tools > Folder Options > View. Under Hidden files and folders, select Show hidden files, folders, and drives. In Windows 7, press Alt to get the toolbar that the Tools menu is on.
2) Rename the Esri folder to Esri_Old.
Registry Settings:
1) Open the Start Menu and in the search bar, type regedit. Select the program regedit.exe.
2) Expand the HKEY_CURRENT_USER and Software folder.
3) Rename ESRI to ESRI_Old and close the registry editor
Now, open ArcMap and see if the issue is still reproducible. ArcMap may take a second to load, as it is recreating those folders. If the problem is not reproducible, close any instance of ArcMap and ArcCatalog and you can copy the folder connections from the ESRI_Old\Desktop10.1\ArcCatalog to the new folder ESRI\Desktop10.1\ArcCatalog.
