It always worked, but since a month or so, it stopped working.
The screen pops up, but when I toggle the slides, nothing happens.

Also, instead of having a brush on the image I get a stop sign.
I have posted a picture of the !$##$%-problem on my DA account, but I'm not allowed to put in a link. So I hope my textual explanation is enough.

Press space-bar. Maybe that works...

I had something similar few years ago. The sign went away after pressing space-bar.
Silly, i know, but it kept working for me in cs3.

Nope, that's not it

When you get your Refine Edge popup, and you press 'E', does that solve it?

Nope
I have tried almost everything (except for the one solution that works of course), checked if maybe in the top bar was mentioned "We disabled refine edge because I'm a nasty blob of pain in the butt" but no.
And Google also doesn't help me.

Just now asked Photoshop on Twitter, I'm keeping my fingers crossed. Thanks so far though.

Sounds like it COULD be a memory issue. (ram or vram)

Try this:

Do a Disc Cleanup on all the Drives in your computer.

Try rebooting your computer after the disc cleanup.

In the Photoshop preferences-performance-memory set the percentage to a lower or higher setting (i have no idea how much memory your computer has so adjust accordingly to between 900 & 1181 mb. hopefully this falls below 85% of the total computer memory.
Under open GL settings or 3d settings the vram might need adjusting down...or maybe even up)

You stated that nothing happens when you toggle the slides. This is what makes me think it's memory. I really hope it starts to work for ya though. Good Luck!

Oh! Something else!
Try setting your output option at the bottom of the refine tool popup and choose New Layer with Layer Mask.
Maybe that'll work for ya?

Not sure if it's going to fix your problem but, whenever photoshop starts acting weird on me, I defrag my hard drive and it usually fixes it.

Some Suggestions:

1. You could try a fresh install on your Adobe set.

2. Are you sure you didn't forget to select inverse? on a selection that usually catches me out. Never used refine edge so forgive me.

3. This tip worked for someone. Simply look at the output option at the bottom of the refine tool dialog and choose New Layer with Layer Mask.


final note in cs 5.5 it is called Refine Mask and works with masks not selections. Well that what i can gather anyway.

That is all.

PROBLEM SOLVED

Thanks for all the suggestions, they unfortunately didn't work. I tried several checks and unchecks and when I un-checked "Save settings", closed the pop-up and clicked on "refine edge", it worked again.