gnupg oddities

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Hello list

I'm having major headaches with Gpg, namely:

gpg: decryption failed: secret key not available 

I get this when i try to read an email that has been encrypted to me. I
have their public key, and they have mine. I can see my pubkey and
seckey in ~/.gnupg and gpg is suid root. It also happens if I send an
(encrypted) email, then go to read the email in sent items. I have 
default-recipient-self uncommented in gpg.conf

There are plenty of instances on google quoting gpg: decryption failed:
secret key not available but these seem to be in relation to 3rd party
products. The problem I am having I can replicate on the commandline.

The system is freebsd 4.7-Rp2 and gpg is:

bash-2.05b$ gpg --version
gpg (GnuPG) 1.2.1
Copyright (C) 2002 Free Software Foundation, Inc.
This program comes with ABSOLUTELY NO WARRANTY.
This is free software, and you are welcome to redistribute it
under certain conditions. See the file COPYING for details.

Home: ~/.gnupg
Supported algorithms:
Pubkey: RSA, RSA-E, RSA-S, ELG-E, DSA, ELG
Cipher: 3DES, CAST5, BLOWFISH, AES, AES192, AES256, TWOFISH
Hash: MD5, SHA1, RIPEMD160, TIGER192
Compress: Uncompressed, ZIP, ZLIB

would be grateful of any pointers on how to fix this

thanks
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