Thanks for the screen shot, it helps alot. I'm very familiar with this view, it is what I see on my older xp machine that has IE6 installed. The preview will just not display properly when IE6 is the installed browser. If you update to IE7 or 8 it should fix this issue for you. If after updating you still see just the plain text in the preview you may need to re-install the extension.
You should still be able to see the preview in the browse like you noted though, so the worst case scenario is that you will need to manually preview in your browse if you are not able to update the version of IE.