Anytime I try to edit a link (a href or img) in cs4/windows7 it will not update the link with the file I select unless I drop down at least one directory and follow my way back up to the desired file. Is anyone else experiencing this? Or does anyone know how to fix it?
It's a known issue awaiting a fix from Adobe.
The only workarounds are:
1) select directory one level below the one you want (as you are doing) and DW will select its parent
2) manually type the correct path