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JPGs will only save as BMP

This problem should be fixed under most circumstances by installing the August cumulative patch for Internet Explorer.

Go to IE Tools, Internet Options, General tab and delete all temporary internet files.

Check for damaged files in ..\downloaded program files (accessed via IE Tools, Internet Options, Temporary Internet Files Settings button, View Objects button. If found, right click and select update or delete depending on what they are, and whether they are needed.

MS kb articles regarding the problem are as follows:

Internet Explorer Saves Images As Bitmaps (.bmp Files);en-us;810978

Internet Explorer Does Not Save Graphics Files in the Proper Format

Cannot Select .jpg When Saving Graphic from a Web Page with a Username and Password in the URL;EN-US;Q266952

Interesting side note:

jpg files are typically encoded in a three-channel, RGB format. It is possible, in some programs, to create .jpg files that are encoded in four-channel, CMYK color format (cyan, magenta, yellow, and black used in four-color printed reproduction). Importantly, Windows is unable to display .jpg files that are not in three-channel, RGB color format under all circumstances - they will work in standard view, but functions such as thumbnail won't work." This interesting problem may also prevent pictures from being saved as JPG (only BMP) will be available, and weird effects when trying to print 4 channel jpgs.