Does Windows 7 say what the issue this is, and does Windows 7 offer th 'Check for a solution'?
How did you install the printer? Does it have a software CD with compatible Windows 7 drivers?
Xerox seems to have a Windows 7 driver download page here;
http://www.support.xerox.com/go/results.asp?Xlang=en_US&XCntry=USA&prodID=6130&ripId=&Xtype=download
See if that helps.
Mark
I just installed a new Dell computer with Windows 7 and Microsoft Office. While the printer is properly installed and attached to the computer, the computer insists there is an installation issue. Can anyone help please?

Chowhound
Comic Vine
GameFAQs
GameSpot
Giant Bomb
TechRepublic