Thanks for the reply ... sadly all those settings were already as you suggested!
Here's some trace detail on the problem:
Virtual XP Mode on Windows 7:
1 0.000000 {NbtSS:3, TCP:2, IPv4:1} 192.168.178.22 192.168.178.27 SMB SMB:C; Tree Connect Andx, Path = \\VIRTUALXP-62006\IPC$, Service = ?????
2 0.000000 {NbtSS:3, TCP:2, IPv4:1} 192.168.178.27 192.168.178.22 SMB SMB:R; Tree Connect Andx, Service = IPC
3 0.000000 {SMB:4, NbtSS:3, TCP:2, IPv4:1} 192.168.178.22 192.168.178.27 RAP RAP:NetShareEnum Request, InfoLevel = 1
4 0.000000 {SMB:4, NbtSS:3, TCP:2, IPv4:1} 192.168.178.27 192.168.178.22 RAP RAP:NetShareEnum Response, Count = 4
Fail on Windows 7 with "not supported":
1 0.000000 {NbtSS:3, TCP:2, IPv4:1} 192.168.178.22 192.168.178.23 SMB SMB:C; Tree Connect Andx, Path = \\xxxNB\IPC$, Service = ?????
2 0.000000 {NbtSS:3, TCP:2, IPv4:1} 192.168.178.23 192.168.178.22 SMB SMB:R; Tree Connect Andx, Service = IPC
3 0.000000 {SMB:4, NbtSS:3, TCP:2, IPv4:1} 192.168.178.22 192.168.178.23 RAP RAP:NetShareEnum Request, InfoLevel = 1
4 0.000000 {NbtSS:3, TCP:2, IPv4:1} 192.168.178.23 192.168.178.22 SMB SMB:R; Transact - DOS OS Error, (50) NOT_SUPPORTED
Absolutely crazy ... MS should really issue an optional patch for this problem.
If you have any other ideas ....???!!!