Photoshop: How do I set [open with] to Photoshop or set it as a [standard program]? (Windows 7)

Try David's solution above. Let us know if that doesn't work for you.

Thank you for your prompt response, really appreciate it. David's solution is the usual way of doing things but unfortunately doesn't work. Intead one has to browse and select PSE10 from the Organiser folder rather than the Programs folder. It seems from the forum and Google searches, that others have experienced, and continue to experience the same problem. I run Windows Vista Home Premium but I notice that folks with Windows 7 seem to have the same issue so I'm not convinced that it points to an operating system problem.

Hmm. That doesn't make any sense at all. You should be selecting the Editor from the Programs folder to set it as the default. You're doing all this from the Windows Explorer, correct?

Yes, correct, from explorer.
When purchased, my PSE 10 files downloaded automatically as follows. Program Files - Adobe - Photoshop Elements 10. Important to note that there are no exe files within this Photoshop 10 folder, not PSE 10 nor PSE Editor.
Both however are found in the Organiser folder which is also placed directly under the Adobe main folder.
This is where it gets interesting.
1. Right clicking/browsing to set as default only works with PSE10.exe (found and selected from within Organisers folder) but when I do the same for the Editor exe file, it won't take.

2. I tried copying both exe files to the Adobe - PSE 10 folder but the Editor exe file still won't take.

3. Having successfully set PSE 10.exe as an option, I can now open jpegs etc directly from the windows explorer picture files, but only if PSE 10 has already been opened.
In other words, opening the jpegs doesn't automatically open PSE10. Although now that I'm aware of this, it's not so much of a problem as before.
So my observation as follows.

That when Adobe constructs the folders and their contents, that they place the exe files within the PSE 10 folder and not the Organiser folder.
Not sure but hoping this may somehow work even though as I mentioned above, I tried copying the editor exe file to the PSE 10 folder but it still didn't work.
Hoping my observations go some way to resolving this issue. Many thanks. Ken Gardner.

Great. Glad you found your solution. Thanks for letting us know.