psd files won't recognize photoshop as default program

hi
i have photoshop cs3 installed on my computer, it works just fine.
but when i try to open a photoshop file (.psd), it asks me to choose a program from the list, and it doesn't have photoshop in it.
when i use "Browse" and fine the photoshop.exe file, i select it, and i'm back on that list of default programs, still without photoshop in it.
so right now the only way it works is if i open photoshop and use file -> open.

this small problem really makes my work harder,
so please, any help appreciated.

thank you for your help,
i tried all the methods, but still it won't recognize photoshop! whenever i choose the photoshop.exe file, it closes but doesn't add it to the list.
other files do recognize photoshop, so it's really wierd.
screenshot:
http://img220.imageshack.us/img220/4844/31998937.jpg

yes. i did. still won't recognize

this is a new computer so it never worked.
i'll try, thanks

well the psds were created on another computer with the same version.
but even when i save a new psd file it's still an unrecognized file.
i tried everything... getting desperate here
thanks