My wife had a similar problem, sort of. I set both our machines to download and inform rather than auto install.
The reason is I like to be around during the install when consents are called for by ZoneAlarm. I found that rebooting her XP machine (with no internet access available at the time) led to yet more requests for IE7 to get access which I granted and all was well.
An uninstall and reinstall may just do it for you.