Try running IE7 without Add-ons.
You could try resetting Internet Explorer settings. (Help and Support article)
"If disabling add-ons doesn't solve the problem, try resetting Internet Explorer back to its default settings. This removes all changes that have been made to Internet Explorer since it was installed, but it does not delete your favorites or feeds.
Close all Internet Explorer or Windows Explorer windows.
Click to open Internet Explorer.
Click the Tools button, and then click Internet Options.
Click the Advanced tab, and then click Reset.
Click Reset.
When you are done, click Close, and then click OK.
Close Internet Explorer and reopen it for the changes to take effect."
What is it like from Safe Mode, or from Normal Mode but as a different user?
WINDOWS XP SHUTDOWN & RESTART TROUBLESHOOTING
Some general things to try.
See if System Restore will get you back to a restore point before your problem with Explorer.
Try Safe Mode (Do you have this problem in Safe Mode?).
Try running ChkDsk to check your drive for errors. Right-click your Drive icon/ Properties/ Tools/ Error Checking. Select both boxes.
Run the System File Checker program from the Run Box by typing.....Sfc /Scannow in it and have your XP CD handy.
HOW TO: Verify Unsigned Device Drivers in Windows XP
If they don't work (and only as a very last resort) you could try repairing windows by running it over itself. You will lose all your windows updates (perhaps even IE7) but your files will be untouched.
How to Perform an In-Place Upgrade (Reinstallation) of Windows XP (Q315341)