"open file security warning" do you want to open this file when clicking on shortcuts

In internet explorer go to Tools | Internet Options
Click on the security tab.
Click Local Intranet and then click Custom Level
Scroll down and find "Launching Applications and Unsafe files"
Click on Enable.
Click OK twice.

this solution didn't work as, the "launch" option was already enabled. Any other suggestions?

if I move the shortcut to the all users folder the app launches with no problem. However, when I move it back to the server, it gives me the same open file-security warning

Try this; what app is it.
Run gpedit.msc, and go to Local Computer Policy\User Configuration\Administrative Templates\Windows
Components\Attachment Manager and enable "Default risk level for file attachments", and then enable "Inclusion list for low risk file types" and add to this list the file extensions that you want to open without triggering this crap.

Ahh yes.  This is the one that works, even with VMWare.

Most sites tell you to add the ip or path in IE's Security tab but that doesn't work in VMWare because my mapped drives or network drives all go through .host under My Network Places.  And IE won't let you enter anything with file://.host or any of the other possibilities as you'll get a "You have entered an invalid wild card sequence" message because of the "." in front of host.

Good work, choswoot!