Open Internet Explorer, click the Tools menu, click Internet Options, on the General tab
under the heading Temporary Internet Files click the Delete button. A small Delete Files
dialog box will open, click to add a checkmark in the box to the left of Delete all
offline content, then click the OK button at the bottom of that small dialog box. You'll
have hard drive movement as the Temporary Internet Files are deleted. When the drive
action stops and the cursor is no longer an hour glass, close the remaining Internet
Options window, close Internet Explorer, then reboot your system. You'll again have the
option to save JPG image files. It's a bug that occurs when the Temporary Internet File
cache is full, that Internet Explorer will only save image files in the BMP format.
Periodically emptying the Temporary Internet Files cache as described above will avoid the
problem, and also give you back some hard drive space.