c:\documents and settings\user\cookies
c:\documents and settings\user\local settings\temporary internet files
Open browser, go to Tools-->Internet Options. Under the heading Temporary Internet Files, click on settings ---> Check how much storage you have, and also check to see that the path is as follows: c:\documents and settings\user\local settings\temporary internet files
If it's not, click on Move Folder to reflect the above path.
If that doesn't help, try reinstalling internet explorer as follows:
http://support.microsoft.com/default.aspx?kbid=318378