I have, after much hair-pulling, gotten Microsoft Picture It! 2001 to work with Windows 7. Windows Live Photo Gallery doesn't do a fraction of the things that MPI2001 did and is horrible to use. I have Windows 7 Home Premium. Here's what to do (this worked for me; I can't guarantee results):
1. Install MPI2001 from your old disks BUT install it under Win98 compatibility. For some reason, even though it ran just fine under WinXP, that compatibility mode didn't work for me.
2. The program will be installed but if you double-click on the icon or the exe file, it will crash. This, of course, makes it seem like the installation failed. So opening the program first doesn't work.
3. Find the picture(s) you want to edit and make a copy of it/each one. This is very important!! Then right-click on the copy of the picture and choose "Open with" and MPI2001. The picture will open in the program.
4. Now, however, the "Save As" function does not work so to save your work you have to choose "Save." This is why it's so important to make a copy of your original picture, so that original will not be overwritten with your edited one.
I've used many of the functions of MPI2001 and haven't found any so far that don't work, except for the aforementioned "Save As." Good luck!