The first thing that pops up in my mind is the question: Where did you download the IE7 from? Your error message is what makes me wonder, because that is not a typical Microsoft error message, and because it actually has a website listed, which is a non-Microsoft website.
The ONLY valid source is from Microsoft itself. I was working at a major company about 3 years ago, when there used to be e-mails circulating that APPEARED to be from Microsoft, but were actually from a scammer. The IE download (IE6 at that time) actually had a virus imbedded inside it. It was the MS-Blast (or maybe it was the SASSER) virus. A lady who worked for the company opened the e-mail, saw the Microsoft logo, and believed that she really did need to download it ?to add increased security? as the e-mail said, so she downloaded it onto the company computer. The virus was so bad, it infected and shut down the entire worldwide network. It was shut down for 48-hours and neither the IT staff, nor the Norton Anti-Virus staff could figure it out, so they had to completely revamp the entire system, which cost the company many important data files, which included Accounts Payable and Accounts Receivable files.
There are websites on the Internet that have IE7 as a download, and some are reputable, but I wouldn?t trust any other source for what I could easily get from Microsoft, but the Microsoft website itself. That goes for anything from Microsoft, MSN Messenger included.
What I would recommend is to open System Restore and use that to go back to a checkpoint BEFORE you installed the IE7. You can access System Restore, by clicking on the ?Start? button, ?All Programs?, ?Accessories?, and then ?System Tools?. If it does not have a checkpoint from before that date, then try to uninstall it from Add/Remove Programs (found in the Control Panel). If it is not listed, then I hope you have a good backup to use.
Once you have restored your computer to its original state, (where it was before this nightmare began), follow my instructions at http://forums.cnet.com/5208-6142_102-0.html?forumID=5&threadID=274178&messageID=2645258&tag=mcnt. This will help to rid your system of any spyware/adware that may be screwing up your computer.
Now install IE7 by opening the ?Start Menu? again, but this time, instead of clicking on the Accessories folder, look all the way up to where you will see in icon that says, ?Windows Update?. This will open up the Microsoft Windows Update website, which is a valid source of getting Internet Explorer 7. My guess is that you will have a lot more updates that need to be downloaded too. You should use Windows Update on a regular basis, of if you have Microsoft Office or any other Microsoft products, there are instructions on the website to make it so when you click on the ?Windows Update? icon, it will actually open ?Microsoft Update?, which is even better. This website will not only update Windows XP, but ALL of your Microsoft products as well.
Another good source for IE7, again from Microsoft, is at http://www.microsoft.com/windows/downloads/ie/getitnow.mspx.
Some users, including myself, had had problems with Internet Explorer 7, but that is because if you already have add-ons installed, they may not work properly once you install IE7. Then all you need to do is uninstall that/those program(s) and re-install them. Which programs are these? It varies from computer to computer. You can find out by following the steps that I have written at http://forums.cnet.com/5208-6142_102-0.html?forumID=5&threadID=275133&messageID=2650942&tag=mcnt.