Not sure how to submit this to Microsoft, so I'll post it here.

I was having an issue with Windows Photo Gallery in Vista SP1.  When I would
double-click on an image file in one particular directory, nothing would
happen.  I could open images in other folders just fine, and I could open
images in that particular folder using other programs just as Paint.  If I
copied an image from that folder to another, it would open correctly in Photo
Gallery.

I finally managed to find the cause of the problem, an Internet shortcut in
the same folder.  If I removed it from the folder, the images would open
correctly again.  When I moved the link back, the problem would occur again.  
Any folder into which I would put the shortcut would become unable to open
images in Windows Photo Gallery.

The only thing that was unusual about the shortcut was that the URL was
extremely long, a Google Maps link.  The specific link was
http://maps.google.com/maps?q=s+oakley+ave+chicago+il&ie=UTF8&oe=utf-8&client=fi
refox-a&ll=41.787697,-87.686691&spn=0.010785,0.020084&z=14&layer=c&cbll=41.77674
7,-87.681011&panoid=R4fqWJEJkVCRco2uu3GK9Q&cbp=1,241.19153282558486,,1,11.544534
208760151&source=embed

I tried editing the shortcut to make the URL shorter, and the problem went
away.  When I recreated the shortcut with a long URL, the problem reoccured.  
I have tried this with other addresses, though I haven't tried to determine
the exact length of URL that causes a problem.

To summarize:  In Vista, SP1, if a folder contains images and an Internet
Shortcut to a long URL, Windows Photo Gallery will fail to open images within
that folder.  The problem is reproduceable.