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Still no real answer but another thought...
I wonder if the upload is somehow being blocked by a router or a firewall? (Volunteer J )
Thanks for continuing to consider the problem, but, no, this isn't a firewall block. I did check that, just to be sure, but it doesn't happen that way anyhow.
The symptom is exactly as described. "Preview" works OK when called directly from Windows Explorer context menu without an intervening step that includes a web browser. Thinking that it might have been a virus or malware related, we completely reinstalled
Windows 7. After the reinstall the problem disappeared for one session, then reappeared the next time that the computer was booted up.
1. Go to any photo upload dependent website (e.g., Flickr, eBay, ForSaleByOwner) and go to the appropriate "upload a photo" page/form at that site.
2. Follow the links on the form to "browse" for a photo to upload, there by calling Windows' internal Explorer features. All thumbnails are displayed correctly.
3. Right-click on any image file (document) and select "Preview". The Windows 7 component "Photo Viewer" will open as it should, but instead of showing the preview image, it will display a message that it "does not have permissions" to open the file. There
is no solution offered.
(FYI: This is clearly a developer's message as, to real human beings it is gramattically incorrect. Messages for an interface designed by humans would not use the jargon noun "permissions".)
As you see, this happens at a point where the firewall is not involved. The communication is inside the system between the MSIE and the "Photo Viewer" application.
By the way, all permssions seem to be granted to the MSIE user.
Thanks again for your kind attention to this.