It's a security limitation on the ability to execute files within the explorer/iexplorer processes in the newer versions of Windows. The idea is to remind you that you are attempting to run an executable across a network connection, and that connection (or source) may not be trustworthy (standard response given to all attempts). I would file this as a "good idea" for the OS, although it might cause you some heartburn. This behavior will occur regardless of permissions.
marktg,
Check to see if you are running identical versions of IE, as there may have been a patch that initiated this behavior on one machine and not the other. Also, check to see if there are differences in security settings in your IE zones (not sure if this will address it, but it might be worth checking).