If you still need to keep IE around after all the security warnings, cranking up IE’s security settings is a great idea. Most people need IE for a specific few sites anyway, so it shouldn’t get in the way much. Here are the security settings to use for each zone (in Tools > Internet Options > Security Tab):

• Internet: High
• Intranet: High (especially if you are on a home network or you have a workgroup)
• Trusted Sites: Medium-High (add the sites you need IE to work with to this zone)
• Restricted Sites: High

(Yes, the zones security model is horrible and well past its sell-by date, but that’s the price you pay for keeping IE around.)

After you do this, you may notice that Firefox has trouble downloading files (a side-effect of trying to respect the new Internet security settings). To get around this, follow the instructions on this thread to tweak your security settings, or (less recommended) create an about:config entry called browser.download.manager.skipWinSecurityPolicyChecks and set it to true. Google Chrome doesn’t have this problem.

If you’re still using Internet Explorer 6, please upgrade to the latest version (version 8) as soon as you can. And consider installing Mozilla Firefox or Google Chrome as your default browser — you’ll be much safer on the web.

Update: this no longer works with Firefox 3.6 — the skipWinSecurityPolicyChecks setting has been removed (not very well thought out move, imho). I’d still recommend cranking up IE’s security settings, though — and using other browsers like Google Chrome or Opera for downloading EXEs (both of these ignore Windows’/IE’s security policies).