2. Your cache should be emptied.
Daehawk's right. Go to "Tools | Internet Options", find the "Temporary Internet Files" panel there, and click the "Delete Files..." button to empty your cache.
For some reason, full cache in IE screws up the saving of pictures and grays out at least one "Save As" option on the rightclick menu.
If my hd is new, I shouldn't be having to empty my cache, should I?
The space available for cache is limited by your IE settings (which you should consider changing) regardless of how much unused space is on your HD.