11.10 - Directory error when trying to create a new user

I added a second user 'shirley' in Settings -> User Accounts, and set a password. The account type is Standard. In 11.04, this worked and I logged in and had a functioning desktop for this user.

How is this done in 11.10? When I try to log in as this user I have this error:

Nautilus could not create the required folder
"/home/shirley/.config/nautilus". Before running Nautilus, please
create the following folder, or set permissions such that Nautilus can
create it.

The only option then is to click OK, this dumps me out to full-screen Nautilus, like this:

There is no launcher or visible way to start any programs. Print screen doesn't take a screengrab. The desktop is similar to this question but I get no terminal when I press CTRL+ALT+T. I have to press CTRL+ALT+F2 and restart from the terminal to get out of this.
This answer is to install gnome-system-tools. Shouldn't I be able to add a second user with the default install?

EDIT: I tried the deluser+adduser suggestion, there was no change after trying it. Here is what I got:

tom@desktop:~$ sudo deluser shirley

[sudo] password for tom:

Removing user `shirley' ...

Warning: group `shirley' has no more members.

Done

tom@desktop:~$ sudo adduser shirley

Adding user `shirley' ...

Adding new group `shirley' (1001)

Adding new user shirley' (1001) with groupshirley'

The home directory '/home/shirley' already exists. Not copying from
`/etc/skel'.

Enter new UNIX password:

Retype new UNIX password:

passwd: password updated successfully

Changing user information for shirley

Enter the new value, or press ENTER for the default

 Full Name []:
 Room Number []:
 Work Phone []:
 Home Phone []:
 Other []:

Is the information correct? [Y/n] y

What has gone so wrong with simply adding a second user? Am I the only one having this problem? I'd reinstall if that fixed things, but this is a fresh install only a few days old.

It looks like you have a directory already called shirley, so when it creates a new user it doesn't copy the needed files from /etc/skel, which is needed to run things.

Let's try removing the directory and doing it from scratch, but before you do, look in /home/shirley and make sure there's no data there that's important:

sudo deluser --remove-home shirley
sudo adduser shirley