If you're running XP with SP2, or Win2k3 with SP1, you'll likely have had security update 896358 applied to your machine. If so, then you've probably got this problem. When you download a CHM, windows might decide it's unsafe:
But even if you click Open, it doesn't render any HTML.
This problem has been documented under MS knowledge base article 902225. The problem here is that there are two workarounds suggested, and the first is somewhat useless.
For some reason, Microsoft suggests unblocking all CHM files that are downloaded from the internet, and allowing them to just run every time (by unticking the check box in the above picture).
The second workaround is more appropriate. If you right click on the specific file and hit properties:
You can click the Unblock button. This allows this single file to be trusted, but all other CHMs are left alone, the way they should be.
In addition, check that the path to the .CHM file doesn't have any # characters in it anywhere. Otherwise, the help viewer gets confused (# means something specific in HTML). If it does, you'll have to move the file somewhere else.
All the best,