If your options are set to display the file extension (e.g. so that an image file is shown as 'dog.jpg', rather than just 'dog'), it's important to ensure that the extension is retained when you rename the file. (e.g. rename it to 'cat.jpg', rather than to just 'cat').
If your options are set to hide the file extension (so that you see just 'dog', rather than 'dog.jpg') and you're getting that warning message, it suggests that there's a registry error. It can probably be corrected by switching on the option to show the file extension, and then switching it off again. With a suitable folder displayed (e.g. 'My Pictures', go to Tools > Folder Options. Click the 'View' tab. Click to remove the tick alongside 'Hide file extensions for known file types'. Click 'Apply'. Click 'OK'. Then go through the procedure again to get back to the situation where file extensions are hidden (but, hopefully, the registry error is corrected).
Chris
PS: Those instructions are for Windows ME. Knowing Microsoft's unerring ability to make simple tasks progressively harder with every new version of Windows, it's probably slightly harder to do the same thing with XP and far more involved with Vista. However the basic method holds true for all versions of Windows. (i.e. enable viewing file extensions and then reverse the procedure).