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Cannot launch internet shortcuts outside of IE7

For internet shortcuts on the desktop or in explorer, they don't launch with a double click, it just highlights the icon.  Application shortcuts work fine
Right clicking the internet shortcut icon only shows "send to, cut copy shortcut, delete, rename and properties" options (see attached).  Application shortcuts show the full list "open, run as...".
Tried to fix by copying the file associations settings form a working machine, running with -extoff, copying over a working shortcut, creating a new shortcut...nothing worked.

shortcuts from Favorites launched ok from IE
running IE7 on XP SP#
How can i get the internet shortcuts working again please?
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flubbster
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From within IE:

Open Tools>Internet Options
Click on the Programs Tab
Look to see if IE is the default web browser. If not, click on Make Default and also place a checkmark in "Check to see if IE is my default web browser" or words to that effect.
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flubbster
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will try and update - thank you
thank you the registry edit fixed the problem