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If I open internet explorer by clicking on the shortcut it opens fine, I can then open local html files with no problem.

I have tried re-setting the default exe that the html files open with and navigated to the iexplore.exe, but this did not help.

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up vote 3 down vote accepted

If you're using XP SP2 or Vista, then Internet Explorer will not let you run active content by default for pages on your local machine.

Perhaps when you "open local html files with no problem" you're actually visiting a URL? Something like http://localhost/blah/blah/blah? In that case you would be in a different "zone", and thus have different privileges.

More information here on the subject: This page describes some workarounds.

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