This is a modification of the "%01 security bug" (that was fixed in IE 5.0) I found in January.

The problem seems to be in the "Microsoft Scriptlet Component".
If you add '%01someURL' after the URL you pass to "Microsoft Scriptlet Component", IE thinks that the document is
loaded from the domain of 'someURL'.

Some of the vulnerabilities are:

1) IE allows reading local files and sending them to an arbitrary server.
The filename must be known.

The bug may be exploited using HTML mail message.

Demo is available at: http://www.guninski.com/scriptlet.html

2) IE allows "window spoofing".
After visiting a hostile page (or clicking a hostile link) a window is opened and its
location is a trusted site. However, the content of the window is not that of the original site,
but it is supplied by the owner of the page. So, the user is misled he is browising
a trusted site, while he is browsing a hostile page and may provide sensitive information,
such as credit card number.

The bug may be exploited using HTML mail message.

Demo is available at: http://www.guninski.com/scrspoof.html

3) IE allows reading of files using TDC

Demo is available at: http://www.guninski.com/scrauto.html

Workaround: Disable Javascript