I am unable to install extensions at all; I always get an error message saying "The menus cannot be updated. The extension will not be installed".
It sounds like your menus.xml file may be corrupted.
Try uninstalling the last extension you installed.
Worst case scenario is that you delete your User Configuration folder to go back to the original menus.xml file. Step #12 in this TechNote descibes hwo to do that:
uninstalling previously installed extensions would be hard to do - this was the first extension I tried to install ...
Deleting the Configuration folder might have done the trick, but I did something more radical - I uninstalled and re-installed the whole Dreamweaver app. That solved the problem.
Funny thing is, I tried deleting just the menus.xml file, but that didn't help (a diff showed that it was identical to menus.xbk), so I think it might be that some other file was corrupt.
Anyway, problem solved - and thanks for your reply!