No option to save as a .jpg available

Step1
Clear your Temporary Internet Files.
Start >> Run >> inetcpl.cpl >> Delete files (you can also use performance enhancer from hisaan.com)
If it doesn’t resolve the issue try Step2

Step2
Start >> Run >> Regedit
HKEY_CLASSES_ROOT\.jpg   For Content Type, it should read image/jpeg
HKEY_CLASSES_ROOT\.jpeg  For content Type, it should read: image/jpeg
HKEY_CLASSES_ROOT\.gif     For Content Type is should read image/gif

NOTE: If you are using AOL: This behavior may occur when AOL's graphic compression option is turned on. When this option is on, the images are saved as the .art file type. Click My AOL. On the Settings menu, click Preferences. In the Preferences dialog box, click Internet Options (WWW). In the Internet Options dialog box, click to clear the Always Compress Graphics dialog box. Click to select the Never Compress Graphics dialog box. Click Apply, and then click OK.