Unable to open JPEG Attachement

Users just upgraded from Outlook 2000 to 2003
Backend: Exchange 2000
Active Directory 2003 with SP1

Users who receive an e-mail with a jpeg attachment are prompted to open or
save file when the select the attachment. When they choose open they get a
restriction error. When they save to desktop and then open jpeg works fine.
Users are in a user OU with a single GPO assigned to it with block
inheritance. The users are only allowed to run approved defined executables.
When we move user account out of OU into another OU without a GPO issue
disappears.

We have not set any of the settings in the GPO that the users are in that
relate to this type of issue. I have searched the GPO but am missing or not
finding what is blocking this. There must be some setting either in Outlook
2003 or in AD that puts up a restriction when selecting open versus saving to
the desktop.

IDEAS?