That screenshot was not very clear about what you wanted. A lot of us have moved on from the Win9x/WinNT/WinXP style taskbar, and I think very few of us used the cascading menus to explore through the filesystem, which seems to be what you are looking for. I'm guessing that a lot of us had the muscle memory ingrained to press Win-E to open up the Windows Explorer to navigate through the filesystem.
Anyway, what you want to do is doable. As you noted, you can park an application to be where the taskbar would have been if you set the taskbar to be always visible. But of course, you would need to be sensitive to the hotspot area that would would activate an auto-hidden taskbar -- but let's say that you have solved that problem/have a solution for that problem/don't care, then it's just always a matter of creating the cascading menus. Just create a WinForm or WPF app that is parked at that location and has a "Start" button or whatever pleases you. I'm surprised that you don't have the "Windows" button at the top left corner like a classic Windows 3.x user.
I would suggest creating the menus on a as needed basis instead of trying to pre-populate them all the way down to the deep folder levels. As you noted, there is some concern about scrolling through a big menu. It's been years since I've tried, but I believe the scrolling feature is built into the menu -- or at least it was back in Windows 3.1 and Win95. If it's not built in, then you may need to resort to doing owner-drawn menus. If the owner drawn menus are too onerous, then just make use of a list box instead of a menu.