I have been going through some major growing pains moving from one use too two users on a server.
One of the problems we ran into was that when my computer has handed to another user, that user could not edit materials.
The solution was to delete all of the registry entries. This worked because the problem was the screen location of the materials. The old user had a high resolution screen, the new user did not. So the material menu was showing up off the screen. We had no idea that was going on.
Did you not think of changing the screen resolution to a higher value if possible to get the floating dialog back into view.
Not saying that I fully understood what the problem was with the material dialog or that the aforesaid method would have succeeded in your case, but have used this trick before for getting floating things like the Command Bar back into the visible area of the screen.