Jeffdav's weblog has an entry on why view->source sometimes stops working and why you get forced to save some images as bmp when they really aren't. While you are waiting for the fix, the workaround we use on the Longhorn Wininet team is to lower our cache size down to something more reasonable. Mine is set to 60 Mb. Not to worry, this won't affect downloading large files.
The setting is available on Tools->Internet Options->Temporary Internet Files->Settings.
I believe that the default for the setting is based on the hard drive size, so you are more likely to run into the issues on a newer machine with a bigger hard drive partition.