It sounds like a problem with the file association and the open action relating to .xls file types.
in windows explorer go to tools options file types
(may be in view options file types depending on windows version)
find the microsoft excel sheet file type and edit this. It should tell you the default file type is .xls and should have a number of actions associated (open, print, view etc.) click on open and click edit.
the command should read something like
"c:\program files\microsoft office\office\excel.exe" /e
and use DDE should be clicked with the DDE message being
and the application specifiedc as Excel
give that a go and post back if it doesn;t work