Ok, here is a very interesting data point:
As I've stated before, on my test XP machine, with IE7 installed, if I install the latest VSPAX v22.214.171.124, the sample fails as well as my own application.
However, if I uninstall v126.96.36.199 and install v188.8.131.52, the sample works and my application works (and IE7 is still installed)!!
So, it looks like the latest version of VSPAX isn't compatible with IE7 on XP.