Microsoft Picture Editor error

When any of the accounts on our domain try to open a Jpg or Jpeg file on our windows 2000 terminal server using microsoft picture editor, I get an error “Unknown file format” I have tried, renaming the graphical file jpegim32.exe and reinstalling office 97, I have tried reinstalling the upgrade to office 03. In addition even when signed on as admin I can’t switch the default program that opens jpeg’s, the options are “grayed” out as if I didnt have permissions. Any idea? Thanks