Can not import PhotoShop CS3 files into Illustrator CS3

Worked just fine yesterday. I can place a JPG. I typically just drag a PSD into Illustrator. I now get an error message sayng it can not read the file. I have tried placing the file and nothing happens (no messages or warnings).
I tried saving the PSD as a TIF, but no luck here either.
I have tried opening a new file and dragging various PSD files in. It seems that none of the work any longer.
And yes I've rebooted.

I have the exact same problem. I haven't placed PSD files into Illustrator for quite a while, but I just tried it this morning and it doesn't work (just like the OP). I even opened a file about a year old, which used to work just fine, but now the PSD file doesn't appear and I can't re-import it. So it has to be some issue recently introduced.
@Galumph - I have Vista x64 and 8GB of RAM. Is there a specific issue that applies to this particular combo?

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