Can't open photoshop files in Illustrator

I have been running Adobe CS3 on my computer for 4 years now, and recently installed windows 7. Since then I get an error on my computer when I try to open photoshop that says:

"there is no disk in drive. Please insert a disk into drive\device\Harddisk1\DRI"

From there all I can do is press try again or cancel. Try again doesn't do anything, so I press cancel and then the program opens like normal.

The other problem I am having is I try to open a photoshop file in Illustrator or try to place a photoshop file in illustrator the program crashes and says:

"The application ran out of memory. Please close some windows to free memory."

I don't have any other windows or programs running, and I have a quad processor and 8g of memory. Shouldn't be crashing.

Does anyone have a solution for me please?

Thanks.