How to change "Open With" option for folder in Mavericks My Desktop folder is set to launch terminal. I cannot for the life of me figure out how to reset that.

I have deleted /Users/username/Library/Preferences/com.apple.LaunchServices.plist and that did not fix it. I installed OnyX, and ran Rebuild Launch Services. I tried changing the open with option to Finder, but I couldn't locate it.

I'm about to wipe and start over. Any thoughts?

Just to be clear, this is on both the the Favorites sidebar, and the actual folder itself.
I'm by no means certain, but it sounds like you have managed to attach an Automator action to it somehow. A folder shouldn't have any kind of File Association/Open With attached to it.

Does the same happen if you manually drill down to the same folder HD/Users/[name]/Desktop ?