Opening files from the Dropbox app seems to always result in a 'Permanent Failure' message. I see that some of the progress bar fills before the error appears. In the past I used Dropbox to view many file types, including JPG, TXT and PDF.
I am googling the problem but I don't see anything specific in the results. I'm wondering if it is due to having too full of an SD card. I will test that shortly.
Device: HTC Incredible (Android 2.3.4), App version: 2.0.1