So, there's definitely no shortcut files in there, eg. LNK files leading to other folders, etc?
What extensions are in there exactly? eg. Any EXE or ZIP files?
You might have to do a bit of experimenting, but more than likely it could be just one problem file causing all the trouble.
eg. In Explorer, try moving all non music files into a new sub folder.
It could be the MPG files to blame, though maybe not ?!?!
Particularly look at all the new files you've placed in that folder since the problem started. It could even be a slightly corrupted MP3 to blame ?!?!
As an alternative, you could just use Explorer and drag the files from the folder into the playlist, but this is just a workaround and you shouldn't have to do this (Open Files Dialog should work ok)
I wish I could help you more, but, errmm . . . I can't think of much else at the mo.
Also, check to see if you can properly access any other folders with music files in via Open Files Dialog (eg. C:\Windows\Media)
btw, how can you get confused between MP3 & WAV ?
One's got .MP3 at the end, the other's got .WAV at the end . . .
unless you've got windows set to "hide extensions for known filetypes"
(Folder Options -> View tab)
Cheers for the sys specs. Everything looks ok there.
Just to make sure . . . what version of Winamp are you using?
Is it the latest 2.78c, and have you installed the WA2update
Further info on WA2update here