When I upgraded to Firefox 3, I found I could no longer download anything. After a long search I found that I had set Internet Explorer Security settings to High. To let Firefox download files again I did this:
Under Internet Explorer select Tools/Internet Options/Security/Internet choose Custom Level and find under Miscellaneous "Lanching Applications and Unsafe Files" change to "Prompt (Recommended)" This setting is used by both Internet Explorer and Firefox.
I have Windows XP Pro. and IE7, sp3. I do not know if any other version of Windows has this same problem. I have a couple of friends that had this same problem and this also fixed it for them.