Since I posted my question in the WindowBlinds category one would assume that it was a WindowBlinds theme.
Quite possibly, and that would be incorrect because
I use the Encounter theme
Encounter is a MyColors theme. Which is quite possibly the source of your problem and which is why you can apply it from Impulse (which then launches MyColors to load it).
I just now applied the Encounter theme on XPHome32bit directly from Impulse, cold restarted, and it retained fine. So...
Is the XP 32-bit or 64-bit? Results may be unpredictable on 64-bit and 64-bit has never been supported.
Are you trying to apply the theme from a Limited Logon now, and before you had been applying it from an Administrative logon? MyColors themes won't apply in whole from a limited user logon, although the results I get are not the results you are getting. If you're using a Limited logon, try applying the theme from Theme Manager (which likely will yield the same results) or apply the components individually from Windowblinds, Icon Packager, and directly executing the weather gadget.
Other than that, unless of course Neil has some insight, your best bet would probably be to start up a Support Ticket here: