You may need to suppress system 7's urge to rebuild a system 6 desktop (if that's what's happening; couldn't tell for sure from your description, so sorry if I have it backwards). The easiest way to accomplish this is to install DesktopMgr in the system 6 system folder (and ONLY in that folder; do NOT install in the system 7 system folder).
You can get the extension here (assuming that the link still works): http://home.earthlink.net/~gamba2/download/desktopmgr201.sit.hqx
You can get the extension here (assuming that the link still works): http://home.earthlink.net/~gamba2/download/desktopmgr201.sit.hqx