Well kind of, but I was double clicking on the icons while I was having my SDL issues.
I'm not sure if it was the MorphOS upgrade that caused this issue, but I can say that it is only effecting the icons on one partition, but not the others. In fact the partition that MorphOS resides on is not having this issue, so I REALLY doubt the update is related to this.
Ironically Folders open when clicked on, only apps do not run when clicked on.
Could it be a name conflict with partition name? I dont recall any issue like this and since other disks are fine....