Solution was posted in MSKB Article Q810978 "Internet Explorer saves Images as Bitmaps (*.bmp files)."
When saving pictures from Outlook Express and Windows XP the file name used is "untitled" and the extension is *.bmp regardless of the original file name and extension. Does anyone know how to correct this?

Chowhound
Comic Vine
GameFAQs
GameSpot
Giant Bomb
TechRepublic