'Edit Document' requires a Windows SharePoint Services-compatible application and Microsoft Internet Explorer 6.0 or greater

Issue:
'Edit Document' requires a Windows SharePoint Services-compatible application and Microsoft Internet Explorer 6.0 or greater


Environment:
Windows XP
Microsoft Office 2010
IE8


Resolution:

Office 2010 is supposed to *better* work with SharePoint Server 2010 or SharePoint Foundation. But it is also backward compatible. Install the feature - Windows SharePoint Services Support - and it should work for version 2, WSS 3.0 and Foundation or Server 2010.

Refer Microsoft KB - http://support.microsoft.com/kb/833714