Melinda, I was having the same problem. I found that I could drag the invitation from my Mail message into the iCal icon (which is in my Dock).
- iCal then shows a notification alert (a red circle with a number in it on the iCal icon)
- Then I went to the View menu and clicked "Show Notificiations"
- Then I was offered a chance to "Accept" or "Decline". I chose "Accept" and the event showed up in iCal.
Maybe there's a simpler, faster way to do it. But this worked for me.