Installed the final WM7 tool bits yesterday. It took a really long time (read: 4-5 hours!). Alas it did not even work when done ;-(
The only way to make it work in my development machine which is loaded with pre-release, beta and other “versions” of software; was to download the standalone ISO file and install locally. This in contrast worked like a charm.
The ISO-file (image) can be downloaded here: http://go.microsoft.com/fwlink/?LinkId=201927