Also, to add, there are no errors or warnings concerning the HIPS failing within the Windows XP Event Viewer logs at all either...
Is there any chance that you can upgrade to HIPS 8.0? Are there any events in ePO for this system? You could be getting blocked by VSE, possibly an access protection rule?
Have you reviewed the HIPS Installation log (C:\Windows\McAfeeHip7_install.log)? It's a bit verbose but it might provide some insight into the issue you are having.
Other than that, it could be a corrupted installation package. You may want to check the SA or UNC repository this machine is using and assure that the HIPS 7 package, and maybe for any other module hosted there, is working properly.