There is post ("Problem with file associations not being set.") that might pertain to your error.
Most of the suggestions pertain to security issues.

Have your tried creating the layer on an XP O/S and running it on the Win7 O/S yet?
Not a long term solution but if this is something you need done ASAP it might be an option.

For what it's worth, I get exactly the same problem on Windows 7 virtual machines running on VMWare Workstation (6.5 or 7), with UAC, File System Virtualisation, and System Protection all turned off.

It's good to know I'm not alone.  I'm just trying to get a leg up on next years deployment but if SVS doesn't work on Windows 7 there is no way that I will migrate to a platform that is so new.  There has to be more people experiencing this but when I search the net there is very little written.  How about it Symantec??  Any news??

I did try an XP layer and the strange thing is that it will start the application and come up requiring the install key.  Obviously XP handles the storage of the parts and pieces differently than W7.

First check your SWV version, only versions later then 6.1.5xxx (SP1) will work on windows 7.

If you are using SP1 try creating an empty layer and see if you get this problem.

I am experiencing the same problem, but not all the time.  Some apps were successful in creating a layer, others were not.  All of these apps worked fine in Vista.

Ken

Windows 7 is handling registry values on different laces then Vista and XP did.
Especially key's under HKCR are stored different.
The reason for this is that Microsoft is trying to deny software developers from using to much HKCR key's in their applications. In Windows 7 there is a tool called file or program virtualisation and you can run a program installed locally as a kind of virtualapp.
I cold not figure out what the use case is for this, but it does not work with apps that have to many HKCR key's.

If anyone hits this error please let me know what applications you're trying to virtualized.  We have never seen this internally and I really can't do much with no apps to look at.

Also, before posting any information, make sure you're on SWV 6.1 SP1 (6.1.5xxx) or higher.

I am having the same problem with Windows 7.  I am using SVS 2.1 SP2. I also tried SWV SP 2.1 SP3 with the same issues.  The application is Visio STD 2003.  The problem occurs only while capturing the application.  If I install it without capturing it installs fine.  I also tried capturing in XP and that woked fine but when I try to impor into Windows 7 it gives me an error stating the application is not installed.  Creating an empy layer works fine under Windows 7.

SVS (2.1.XXXX) is not supported on Windows 7.  You need SWV 6.1 SP1 or higher.