Not enough RAM message in Photoshop but preferences shows all 8 GB available

After a fairly smooth year and a half working with Adobe CS5 (Photoshop, InDesign, Illustrator) on my iMac 27" i7 I cannot open any file in Photoshop, no matter how small. I get the message "Could not complete the Open command because there is not enough memory (RAM)." even with all other applications closed and all 8 GB RAM available, and after restart. In Photoshop preferences my usual 70% RAM allowance shows as available. I also cannot view any video files in Firefox or Safari, but WMV and MOV videos play fine with QuickTime outside of the browsers. This all started after I completed the latest Apple security update (2012 001 I think it was) and also downloaded and installed Smith Micro's Anime Studio Debut 8.

I'm running an iMac 27" i7 (2010), 8 GB RAM, Snow Leopard 10.6.8, Photoshop CS5 Extended (InDesign and Bridge Adobe CS5 seem fine). Have done all latest Firefox updates as well. Video plugins: Flip4Mac, QT, DivX (all up-to-date far as I can tell)

Since this started Friday I've updated Pshop and Flash and all Adobe plug-ins, restarting afterward. I ran Disk Utility and found some files were out of order (or corrupted?), so ran the repair sequence using fsck single user/command-line utility since my superdrive hasn't been accepting discs for a couple of months. Which is also why I haven't just reinstalled Photoshop. Eventually I'll get the drive fixed and reinstall PS etc but this will not solve the video problem. It seems there must be a codec or plug-in problem (audio/video) I'm missing or which is not in the right place (and don't know how to look for it).

Been a Mac user for over 20 years and have never NOT been able to figure out my next move. Any help would be appreciated!