I don't have Gnome on this system - don't usually have it at all - so I can't check and can't give a good answer. But any answer is better than no answer, I guess. Likely places are obviously ~/.nautilus, ~/.gnome*, ~/gconf*, and /tmp. I'd clean /tmp of anything that looked likely (though that is often flushed on reboot) and then try finding the dotfiles - failing that, try moving entire dirs to ~/.nautilus.old and seeing if a default nautilus would recover.
Before any of that, I'd check the nautilus settings in the gconf-editor - may be as simple as deleting a path key.
That said, I'm not sure what the problem really is or even exactly what you're doing. A FAT stick with PROJ and a reiser/ext3/something with Proj and copying to (or from?) fails at <some point> but 'cp -r <something>' works. But you've deleted PROJ from the stick and nautilus still fails at the same point?
Kind of confusing. But this may be the downside of Gnome's 'stickiness' with every damn setting. When something goes wrong, it likes to stay wrong.