Try setting up a new virgin account. Go to System Prefs > (System) > Accounts
Click the lock & type in your password. Then click the Add button & think of a new name for an account. eg: Test. And make a simple easy to remember password. After doing this, log into your new account. Open LW from there & see if you have same problem. (Remember you can have both accounts still active if you're using Tiger. Click under your name in the top right-side of the menu bar & you will see log-in option. You can swap easily between accounts there.) Tell us how it goes. Oh & when you open up LW, do not use the same download location as the other account. Better still, make it a different drive/partition if you have one.

I have a suspicion you may have a directory problem. Do you have DiskWarrior by any chance? One option is to start up using your Installation disk & open Disk Utility from the utilities folder & use "repair disk" (do NOT repair permissions from the installation disk.)