It works, but there are limitations. Wallpaper transfers, other settings transfer, but not all settings will. For files, you need to make sure that you're redirecting any gathered folder to a new location. If you gather C:\Documents and Settings\<username>\My Documents, you need to tell it to redirect to C:\Users\<user>\Documents on the Windows 7 computer.
I would clone Default.pbt and then modify it for your use, starting simple, testing, and building more into it as you go. The capture personality task will gather the personality on XP, and the distribute personality task will deploy the personality on Windows 7. I just run template.exe on the NS to create the new template. Does this answer your question?