Try running this from Start>Run or from a command window:
regsvr32 urlmon.dll
Sounds like something unregistered your machine's ability to recognize links properly. Could happen in any number of ways, like uninstalling a download accelerator, or even getting rid of some spyware. I've seen this a dozen times on Win98, 2000 and XP.
There are a few other things I can think of, but that's the simplest and most likely solution. Let us know how it goes please.