Hi Lee
This is a really common problem. Microsoft are aware of
it and you can find the answer to the problem in
Microsoft Knowledge Base Article - 260650 "Internet
Explorer Does Not Save Graphics Files in the Proper
Format"
http://support.microsoft.com/default.aspx?scid=kb;en-
us;q260650
Here is a little bit from the article.
This article was previously published under Q260650
SYMPTOMS
When you use the Save Picture As command for a graphics
file in Internet Explorer, you may be able to save the
file only as a BMP file, even if the file is in another
format (such as GIF or JPEG). The file name may also
appear as "Untitled."
CAUSE
There are several reasons why this issue may occur.
1. This issue may occur if your Temporary Internet
pages cache is full.
2. This issue can occur if you have "Do not save
encrypted pages to disk" selected in Tools, Options,
Advanced Tab and are loading the page over a secure
connection (https).
3. This issue can occur when you connect to a Web
site using an address that contains <username

assword>.
For example, the server is accessed through
http://<username

assword@site>/default.htm, instead of
http://<site>/default.htm.
4. For more information about an additional cause
for this issue, click the article number below to view
the article in the Microsoft Knowledge Base:
250747 Right-Clicking, Selecting 'Save Picture As' Does
Not Save Image with Correct Extension
Hope that gives you some answers Lee. For me the answer
was as simple as doing a full disc cleanup and checking
all options in disc cleanup. Interestingly my temp
cache was no where near full, but nevertheless it cleared
the problem
Jade