How much RAM is installed in your system? I recommend a minimum of 512 MB when using Classic. I would also recommend that you do not use the Classic option to 'start Classic when you log in', as I prefer to control when to start Classic. (Are you sure you have your system is booting to OS X, and not OS 9?) You shouldn't see anything of extension icons loading when your system is booting to OS X, unless you have it set to start automatically, turn that setting off, Classic will start when you try to start a Classic app.
Last question: What does happen when you try to start any Classic apps (error message, anything at all) Make sure that Classic is running (in your System Preferences/Classic pane)