Thanks for the reply.
To update, I discovered that the saves are actually being recognized its just the little summary that appears in "The Story So Far" is just completely blank. It still loads and saves fine as I was able to play after I uninstalled and reinstalled the game and used a new preference file.
Here is the real problem. I started Wallace and Gromit episode 3 yesterday and the same thing happened to me. So the problem mainly lies with the preferences. For some reason it forgets my settings and defaults to Fullscreen off and some graphics setting lower than 800 x 600 (640x480?). I figure it has to be lower than that because the window starts very small and when I set it to 800x600 is grows in size. This is very annoying since I normally play at 1920x1080.
I set it once and it plays fine, then I restart my computer and it happens again. I have to delete the preference file and make a new one.