After migrating to Windows 7 and IE8, our users were unable to open SharePoint 2007 document libraries in Explorer View. There was not a problem with Windows XP and IE8. We found two issuses involved here.
First was Urlscan Filter 3.0 was installed on our server. The Windows 7/IE8 combination apparently sends header verbs not used by Windows XP/IE8, most of which are disallowed by rule. If possible, the best thing to do is uninstall Urlscan from your SharePoint server. In order to utilize Explorer view, you pretty much need to allow all the verbs. If you need to keep Urlscan installed, you'll need to work through the logs, performing the different oprations in Explorer View, making sure you have all the needed verbs allowed. We have up after 5 verbs and justuninstalled Urlscan.
The second issue we found is that IE8 on Win7 doesn't actually support Explorer View. Instead, a Windows Explorer window will open, and you can work with the library that way, but yuo aren't actually in the IE browser. To me, this is preferable than opening the Explorer View in the browser, as the Windows Explorer is faster and more fluid.
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