I've been running Ubuntu as a regular server for quite some time now.

I recently went throught a series of updates and had to reinstall Apache2. In the process, php files stopped being parsed. Calling them in the browser would pop up a "What do you want to open this with?" dialog. I went through all the steps to reinstall and configure php with apache as I had done in the past. Something strange is happening, however. For some reason, any php filein /var/www will not be parsed, but any .php file in the userdir's (/home/username/public_html) is. I can't figure this one out for the life of me.
Any help would be greatly appreciated.

This might be the same strange error I've seen a couple other times. Chances are you are using a Mozilla-based browser. Try closing out of the browser, killing all processes to it and trying again. If that doesnt help, reboot the computer. I know it sounds wacky, but I've seen this atleast 4 other times.

You know, I tried that a couple of minutes ago without success. I also thought it might be a cache issue or somthing like that so I tried it on a separate machine that hadn't ever accessed the site before with similar results.

Am I at the point where I need to remove and re-install Apache and PHP to solve this?

Maybe look at the apache config file and do a search for all occurances of PHP to see if anything got mangled up somehow.. like messed up directory options or something. Other than that I am stumped