I cannot download anything from the internet using any browser. Every time I download something from the net, it prompts me where to save it and other download dialog boxes, I can hit 'save' or 'download', it seems to be downloading normally like it has no problem, but when the download finishes, the dialog box closes but the file that was supposedly downloaded does not appear any where on the hard drive. The firewall is not the problem. IE and firefox security settings are enabled to allow downloads. Any ideas?

Were you using Firefox to download? Firefox keeps downloads in it's own dedicated downloads folder. If you're using Vista, it's the same thing. Next time you try to download something, untick the box to have the dialog box close automatically after download. You should be able to look at this and see if the item actually downloaded or if it was interrupted or otherwise failed.

Thanks. Even if the "close this dialog" box is unchecked it still closes after "supposedly downloading" I have tried both Firefox and IE both seem to do the same thing. In Firefox the preferences show the download folder assigned but is empty as if it never really downloads at all. Does not give any error message. I have deleted cache. Searching the entire hard drive results in nothing found with the name of the file trying to be downloaded. Thanks!

I have had this exact same experience. You are not going insane. I found that avg-free was the problem. I uninstalled it and the problem went away. However, when I reinstalled avg-free, the problem came back.