I have a different version, but am pretty sure I just found the problem.
When I said I could encrypt a file to the key, this wasn't actually correct. I was using the Current Window option to encrypt Notebook text, and this does work. But actually, it shouldn't.
When I try encrypting a file with PGP Zip, the key is not availble for encryption. And it turns out that it shouldn't be.
For any recent version of PGP, the key's User ID has to have a valid self signature. This is automatically done when recent versions of PGP generate a key. I had checked before to see if this key did, and it does have a self signature. But with my current review of the key's properties I see it's description as "RSA signature corrupt." So the problem is that somehow the required self signature of the key has become corrupt.
This might possibly have occured in the public key being copied, or during Internet transfer of it. If the cause was something like this, having it sent to you from the owner again, might take care of the problem. If the key's owner has his/her key with the corrupt signature, the problem should be resolvable by now signing the key's User ID by the key itself; just as he/her would sign any else's key he/she wants shown as Verified.