I have Windows XP and Internet Explorer 7
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I have Windows XP and Internet Explorer 7
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Here's the first hit from google.com about this.
http://technet.microsoft.com/en-us/security/advisory/967940 notes the changes and how software will no longer autorun.
"Many existing devices in market, and many upcoming devices, use the Autorun feature with the AutoPlay dialog box to present and install software when DVDs, CDs, and USB flash drives are inserted. The AutoPlay behavior with CD and DVD media is not affected by this update.
Users who install this update will no longer receive a setup message that prompts them to install programs that are delivered by USB flash drives. Users will have to manually install the software. To do this, users click Open folder to view the files, browse to the software's setup program, and then double-click the setup program to run the program manually."
So no. It's working as expected.