I was running into this issue and it made things difficult.
I was running VPC 2007 SP1, Win 2008 Server, WSS 3.0 SP2 and I was unable to view the SharePoint document libraries in explorer view.
I needed to add the feature “Desktop Experience” on my server to fix this issue. Many thanks to Tihomir for posting this fix.
I had an old Laptop that I bought in March of 2004. It was running XP SP3 until now.
I was able to update it to Windows 7 Ultimate. I did run the Windows 7 Upgrade Advisor to make sure there were no issue.
I did a clean install. I was pleasantly surprised to see that Windows 7 installed without any problems in such an old PC.
I did not need to get drivers for any of my devices.
I had previously installed Windows 7 on two other Laptops and I love it so far. It seems to run faster and has many improvements that make me more productive.