One of the new features in Windows Vista is the ability insulate your machine from potentially malicious web-sites. The insulation extends all the way to creating a fake file system for components that you may have authorised to play in.
I saw this feature demonstrated last year, but it wasn’t until now that I realised how complete it was. I was actually navigating to a SharePoint site that happened to use a self signed certificate and wanted to upload a document. When I clicked the upload button I was presented with an empty directory.
After being confused for a few minutes (and double checking that I hadn’t finally flipped) I looked under the security settings for Internet Explorer 7.0 (installed by default in Windows Vista). Basically its the “protected mode” feature that causes this behaviour. It gives Internet Explorer 7.0 a fake registry and file system for any malicious components to run in without them really realising that they are restricted.
You can turn this feature off it is causing you problems (it was for me). Just go to the security tab in Internet Explorer 7.0.