Me Too
I have this error too. No matter how I install that driver (whether I run the .exe in Vista Compatibility mode, or try to "Update" the driver of the "Video Controller" under Other devices in device manager or update the "Standard VGA Graphics Adapter" to the driver from intel). It seems that it installs fine and the driver is ready to work, but it needs a restart to take effect. So when I restart, it seems to just get rid of the Intel driver that I just installed, per the message that Sakai mentioned, to be replaced by the Standard VGA graphics adapter again. If only there was a way to disable the Standard VGA Graphics adapter from automatically installing itself over the Intel driver, it seems like it would work.
When I connect via remote desktop from another computer, it seems that the driver installs fine and it seems like I should be able to get the resolution that I want, but Win7 just overwrites it upon restart...
I attempted to delete or move some of the dll files that are being used as the driver for the Standard VGA Adapter, but that didn't help either... This is really the only thing preventing me from liking Win7 because if this graphics chipset isn't supported now, then there's no way that MS or Intel will create a driver at a later time for such an old chipset...which means no Win7 on my 700m, not now, not ever.