Changing default handler for file type STOPPED working

Check if you disabled/mapped the option(aka. alt)-key in keyboard preference pane.
Try to change the default handler by opening the informationscreen (cmd-i) of a file of the type you want to change and try to change it there.
And maybe telling us your OS X version could help sorting out your problem.

 

If you hold CTRL while single-clicking the image or whatever in question you will be given a contextualmenu with a Open With menuitem. You can also rightclick the same file and be given the contextualmenu. I tried holding down the ALT key here in OS X Leopard and that just opened the imagefile(PNG) I had selected.