I get the following message: "You can't open the application Microsoft Excel because PowerPC applications are no longer supported." I don't see why it wouldn't automatically convert this as my .doc files get coverted in Pages. Does this mean I've lost access to all of my spreadsheets that I created with the Excel???
You apparently used an older version of Excel to create the .xls files that back then used PPC based software which is no longer compatible with modern Apple OS's. You need to Upgrade to Office for Mac 2011, rather than the older Office for Mac 2004, or earlier that you used. "Numbers" I do not believe will be able to handle those older versions of Excel data.
If you drag an Excel file onto the Numbers icon, it doesn't open in Numbers?
The error message you're seeing is because your iMac's been upgraded to the Lion OS, and the Lion OS doesn't support PPC applications.
You've got a couple of choices:
1. You can spend the $100 or so to upgrade to Microsoft Office for Mac 2011, which, by the way, includes a free update to the next version of Office for Mac.
2. You can convert all of the Excel files to Numbers. Be aware, though, that there may be some formatting changes made during the conversion.
I'm not at my Mac right now, but there is a way to associate files with a given application. It involves right-clicking the file, choosing Get Info, then changing something in the resulting window. Unfortunately, I can't provide the exact wording just now.
I hope this helps.