I know this is an old thread, but I ran into the exact same issue. Bazooka had a PERFECT description of the problem. I signed up for this site just to post the solution.
Symptoms:
Internet Options > General > Browser History | Settings > Disk space to use
--> This is set to 0 MB, and cannot be changed beyond 10 MB. You can change this to 8, but the change won't stick.
--> Attempts to change this value yields the following error message:
"Please select a value between 8 and 8 for how much disk space Temporary Internet Files may use"
Internet Options > General > Browser History | Settings > Current location
--> This is completely blank. This is a clue as to why it's set to 0 MB.
Internet Options > General > Browser History | Settings > Move folder ...
--> This does not work
Deleting the Temporary Internet Files folder does not help:
C:\Users\<username>\AppData\Local\Microsoft\Windows\Temporary Internet Files\
Solution:
* Login as a new user, and that user should not have this problem.
* Or delete the corrupted user profile, and recreate it
There might be a more surgical solution, but these were acceptable for me
Reasoning:
I don't care enough to verify this, but the machine was running IE 10. After downgrading to IE 9, existing users' profiles that had used IE 10 were corrupted. However, brand new users were not impacted.