Why does Hex-rays thinks that 32bit PE is 16bit?

Question

I'm using IDA 6.1 32-bit version.

I'm pretty new to IDA and Hex-rays decompiling. My goal is to generate some C source from a 32-bit PE executable. I know this file is 32-bit PE executable. I've looked at the header struct in a hex editor and confirmed that it has the PE header segment. When I dissassemble the file in IDA Pro, it recognizes that it is an x86 PE executable file.

Further, IDA produces the following output after analyzing the header segment:

; Format      : Portable executable for 80386 (PE)
; Imagebase   : 400000
; Section 1. (virtual address 00001000)
; Virtual size                  : 011DAC9D (18721949.)
; Section size in file          : 011DB000 (18722816.)
; Offset to raw data for section: 00001000
; Flags 60000020: Text Executable Readable
; Alignment     : default
; OS type         :  MS Windows
; Application type:  Executable 32bit

However, when I select a function and attempt F5 to open the Pseudocode window, I am greeted with the unhelpful message:

Decompilation failure: FFFFFFFF: 16bit functions are not supported

Please refer to the manual to find appropriate actions

So, I referred to the manual, which is also unhelpful:

The message text says it all. While the decompiler itself can be fine tuned to decompile 16-bit code, this is not a priority for now. May be in the future it will support 16-bit code.

The thing is that this isn't 16-bit code. What am I doing wrong?

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PS If I need to provide more information to help in answering this question, please let me know. I'm very new to IDA/Hex-rays and I'm not sure what else would be useful here.