Thanks vesuvius. ID is LocalSystem which did not change, so don't think that is it.
I am experiencing the same issue!
I tried the solution here as well as deleting the folderC:\Users\<User>\AppData\Local\Microsoft\Microsoft SQL Server Data\SQLEXPRESS
It did NOT solve the problem.
take a look athttp://social.msdn.microsoft.com/Forums/en-US/sqlexpress/thread/68d72001-6802-40f2-b76c-501a27293bcc
Uninstalling SP1 might solve your problem, for me it did!