The Mail Bundle in Leopard broke this.
I found a fix at the site of someone who is really made at PGP and thinks PGP Sucks. (I don't think it does. I think it needs a small sub-group that handles retail customers.) He also pointed me to the solution. Sen:te's GPGMail. It is not a final release, but is working fine for me. (I have the GPGMail_d51_Leopard distribution.) It requires Gnu Privacy Guard, which I got from Sourceforge's Mac GNU Privacy Guard site. (You will have to use Terminal to import your key files.)
It works fine, just as I want it. I moved the not-working PGP Mail Bundle out and moved in the GPGMail bundle.
Here are some screen shots.
The Mail/Preferences window is straightforward. For more and earlier discussions on secure email, check out my secure e-mail collection.
UPDATE: Updated to PGP 9.7. All is well.