The subject behavior will occur if the Internet Explorer Zone Elevation Blocks feature detects the MOTW (Mark Of The Web) comment in the HTML code.

The Internet Explorer Zone Elevation Blocks feature is a new security feature in Windows XP with Service Pack 2 which prevents you from accessing a file in a zone with stricter security. Since the presence of MOTW causes the Internet Explorer Zone Elevation Blocks feature to believe that the file is on the Internet, the hyperlink would be accessing the Local Machine zone, which is tighter security, causing the access to be blocked.

To workaround this behavior, place a file that you want users to open in a shared folder that can be accesses via an UNC (Universal Naming Convention) shared resource.

NOTES: See Internet Explorer UrlAction Security Settings in Group Policy.

NOTES: See When you view an HTML Web page that references HTC files and XML files, the script that references these files will NOT run in Windows XP Service Pack 2?