i did a bit more testing with this:
i made 123.lnk point to 321.lnk then put it in a zip file. I did the same with 321.lnk.
now, i unzipped the files contents to my desktop, and nothing happened, i opened each up in winhex (didnt change anything at all) after i closed winhex, i had the error come up, clicked close, and explorer restarted without my active desktop.
the shortcuts were still there, i clicked on them (wouldnt execute), poked and prodded them, but nothing more happened.
i also tried this in another normal folder, and nothing happened.
Perhaps, that the active desktop is what enables it to crash without execution?