every night at 1200am my system32 folder opens up by its self. I have checked the task scheduler, and several other self starting programs and can't figure out why this folder opens up automatically.. It doesn't do any thing except interrupt any program I am running. How can I stop this from happening.

The precise time leads me to believe that its a scheduled task related event (check your Scheduled Tasks folder) for any task scheduled at or around that time.

There is absolutely nothing in the task schedule folder, this is whats got me puzzled..the precise time that it opens yet nothing I can see is telling it to open. :-/

   Then something must be running in the background that opens it.  Check the startup items and the running processes and/or applications.

I checked my startup folder, the only thing in it is my fax mointor program. I have no clue as to what application might need system32 folder to open. Checking windows Task Manager doesn't show any applications running other than what I have running. If there is a system process causing this I don't know which one could do this. I am running win xp pro, I checked my msconfig, but without much of a clue as what to look for that was fruitless effort..startup has a lot of things going, but I can't see any relationship with the precise timing of system32 folder opening.  I guest a follow up question could be..Is there a way to go directly to a folder and go to options an schedule that folder to open up at a schedule time?

Doing a Google search with "system32 midnight" and "system32 error" gives you a lot of pointers (not all of them relevant though). One of the first hits (with "system32 midnight") is a message to another forum with exactly the same problem.
There is another scheduled task to think about: Windows Update. Check if it is scheduled at 24:00/12 AM, and if it is working properly (probably not, if W Update is indeed the culprit).