First off, welcome aboard
tkk!
I experience the same results as
Squeeze and have no probs dragging an image icon into PS and having it open as it should. (WinXP, PS7) [confused]
Sorry that I can't be of any *real* help but I just might conclude/guesstimate that your preference file might be the source of your angst, as
Squeeze has pointed out. Try resetting same as follows: Hold down Ctrl+Alt+Shift immediately after launching Photoshop. A prompt will ask if you want to delete the preferences file. Click Yes. Photoshop will now launch based on its original default settings...

Obviously, before going this "drastic route" you should backup all your tool proferences.
Let us know how you make out...