Sound like the Launchy.xml file is not set up correctly...
After you installed Launchy, did you proceed with the instructions(3. and 4. in UR V3 help) to "Unzip and save this xml file in your user chrome path"?
When I click on the Launchy button in my tool bar I have options
Open link in UR (copy) and
Open link in UR (Link)...and I use these daily.
FAQ
http://www.kinook.com/Forum/showthre...hlight=launchy