.eps preview assistance in illustrator

I had to update my domain password the other day and in doing so lost all my microsoft applications. I have had to re-install them all and they are now working.

Illustrator also had issues and now wont preview eps files. I have re-installed Creative Suite CS5 and its still not working.

In all the .ai files I open the box shows where I have placed the graphic .eps file (saved previously in Photoshop) but this image does not preview.

If i save the .ai file as an eps and run it thru Acrobat distiller it distills the images in place and they show.

What is missing or turned off, please please help I have wasted a day on this so far?

I run a Mac with  10.7.5 and have 10GB of ram and terabites of space.