Vista - Mailto link errors from IE only; works from Safari however

Somehow my ability to use mailto links from IE has broken. I am not sure when/how this happened. A new mail window does open; however, not without an annoying error message saying "Could not perform this operation because the dafault mail client is not installed properly".

I have Vista Home Premium, Outlook 2007. It is possible that the problem began when I switched from PC Tools Internet Security to Webroot Spysweeper with Antivirus. BTW, I uninstalled both and now use Norton Internet Security.

I have done extensive troubleshooting, but nothing has worked. Here is a summary:
- I have tried all of the Default Program tools
- I have performed a "Repair" on MS Office
- I have switched defaults to other programs (Safari, Windows Mail), then back
- I installed Thunderbird and tried using it as the default mail client
- I have checked Registry entries (although I am not entirely sure what to look for)
None of these work.

The only interesting observation is that mailto links work from Safari no matter which programs are set as default. But they do not work from IE7.

Here are my registry entries:

[HKEY_CLASSES_ROOT\mailto]
"URL Protocol"=""
"EditFlags"=hex:02,00,00,00
@="URL:MailTo Protocol"
[HKEY_CLASSES_ROOT\mailto\DefaultIcon]
@="\"C:\\PROGRA~1\\MICROS~3\\Office12\\OUTLOOK.EXE\",7"
[HKEY_CLASSES_ROOT\mailto\shell]
[HKEY_CLASSES_ROOT\mailto\shell\open]
[HKEY_CLASSES_ROOT\mailto\shell\open\command]
@="\"C:\\PROGRA~1\\MICROS~3\\Office12\\OUTLOOK.EXE\" -c IPM.Note /m \"%1\""

[HKEY_LOCAL_MACHINE\SOFTWARE\Classes\mailto]
"URL Protocol"=""
"EditFlags"=hex:02,00,00,00
@="URL:MailTo Protocol"
[HKEY_LOCAL_MACHINE\SOFTWARE\Classes\mailto\DefaultIcon]
@="\"C:\\PROGRA~1\\MICROS~3\\Office12\\OUTLOOK.EXE\",7"
[HKEY_LOCAL_MACHINE\SOFTWARE\Classes\mailto\shell]
[HKEY_LOCAL_MACHINE\SOFTWARE\Classes\mailto\shell\open]
[HKEY_LOCAL_MACHINE\SOFTWARE\Classes\mailto\shell\open\command]
@="\"C:\\PROGRA~1\\MICROS~3\\Office12\\OUTLOOK.EXE\" -c IPM.Note /m \"%1\""

Any ideas? (I know I should probably move to another browser, but I want to fix this anyway).

Elch

Update - I installed the IE8 beta and it makes no difference.