[Peter Hannaford]

OK, I too had this problem. Everyone goes on about resetting preferences etc. None of this worked.

The way to fix is the following making sure you have Photoshop closed first:

Navigate into your user profile

c:\Documents and settings\YOUR PROFILE\Application Data\Adobe\Adobe Photoshop CS3\Adobe Photoshop CS3 Settings

Locate file called:
Actions Palette (PSP File)
Delete this file or rename it.