Cannot Delete File: File System Error (1026).Cause: This issue can be caused by one of two reasons:
1) Insufficient hard disk space on the computer.
2) A file is copied or moved to a disk, then deleted, and then the Undo Copy or Undo Move is clicked to try to retrieve the file.
3) Attempting to copy or delete a file over a network and the server is having difficulties sending the file because of security issues or high network traffic.
Solution: Insufficient hard disk space on the computer.
Verify that the hard disk drive has at least 100 MB of free hard disk space.
A file is copied or moved to a disk, then deleted, and then the Undo Copy or Undo Move is clicked to try to retrieve the file. 1) From the Windows desktop right click on the Recycle Bin and click properties.
2) In Recycle Bin Properties remove the check from "Do not move files to the Recycle Bin. Remove files immediately when deleted"
3) Click Apply and then ok.
Note: The Undo Copy or Undo Move do not work with a removable media or floppy disk drive. Attempting to copy or delete a file over a network and the server is having difficulties sending the file because of security issues or high network traffic. Verify with the network administrator that there are no security issues or reports of high traffic at the time the error has occurred.
Source: http://www.computerhope.com