Windows 7 can't get launchy to work...

It worked fine for me on the same build.

Did you read this?

Once Launchy has been started, it hides in the background. You bring it forward by holding the alt key and tapping the space key. You then type in a few keys of the program you are searching for and hit enter once it has been found. You can also make Launchy dissappear again by hitting escape or alt+space.