The issue reported by the client was that for a particular website on the Internet they were unable to open PDF’s directly in IE8, they were only offered the option to save them to the local machine. Under IE6 all had worked ok – on clicking the PDF link they were offered Open | Save | Canel buttons, on IE8 they only had the Save | Cancel buttons.
This came down to the improved security model of IE8 and the new HTTP Header directives it now supports. Have a look at “MIME-Handling: Force Save” in this blog post. To prove it I used Fiddler script to block that specific HTTP Response Header to see if I could get back to how IE6 works. Once the Header was blocked from the HTTP Response the Open button appeared in the Dialog box.
Putting the site into IE8 Trusted Zones didn’t alter the behaviour and a search of the Group Policy settings available for IE8 didn’t show up anything around download-options or HTTP Headers.
The root Cause of the why the HTTP Header is being sent by the website is down to the software used by the specific website, they are hosting their content on SharePoint2010, by default this sets the noopen HTTP Header Response as a security feature. It can be turned off using the Central Admin console which this post refers to.