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 v220.127.116.11, the sample fails as well as my own application.
However, if I uninstall v18.104.22.168 and install v22.214.171.124, 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.