In my previous blog about IE7 I pointed to info indicating that users who had to for whatever reason make a repair to XP would wind up with a broken IE.
It turns out, that this has allegedly been fixed in the IE7 FR version. My source, another MS MVP had been informed of the fix but due to NDA restrictions I can not share any 'official' info about it. But the IE team still recommends users uninstall IE7 before making any repairs.
And that leaves me to think that perhaps it's not quite repaired. At the very least the KB article should be updated.