Welcome to the forum.
There are about three on-going threads here, on similar. In many cases, it appears that Registry "cleaning" utilities are killing PrE's link to the additional Functional Content. Do you have similar, or have you run any Registery cleaners?
A Search of this forum will quickly lead you to those threads, with some cleaning programs mentioned.
Good luck, and I hope that it is that simple.
[Edit] HERE is one of those threads.
Mr Tin, can you import .PSD files?
I have the same problem as mr_tin. I've installed from the DVD and I've downloaded content from the internet with the same results. It keeps telling me I have reduced content. I have norn nor will I ever, run a registry cleaner. I'm on an XP system, SP3. I bought the bundle and have tried installing on my Win7 SP1 system. I can not get Premiere Elements to run at all on Win7. I've opened a case with Adobe support and so far no luck. At least it run on the XP system.