There's definitely a problem with IE7 and the Adobe Flash plug-in. Many times I've had a site say 'Flash 7/8 required. Click to install' when I know that Flash 9 is installed already and going to the Adobe site confirms this with a Flash 9 animation. So where's the issue? It looks like I'm not the only one with this problem, and courtesy of devlib.org,

it appears that most users who continue to use the Flash 8 plugin in IE7 are unaffected. But when these users upgrade to Flash 9 or install MSN Live Messenger — which in turn insists on installing Flash 9, there the upgraded software makes its way into the system.

Unfortunately, when the software is installed through MSN Live, it appears that the installation is faulty and this eventually results in IE7 crashing when multiple tabs are open and one or more of the tabs is displaying Flash based content.

The solution is to reinstall the Flash Plug-in cleanly and again devlib has the alternatives for a clean uninstall before going t adobe.com and installing the latest version from there. Adobe has its official uninstall instructions here but the more direct approach is as follows.

    1. Open a DOS / CMD Window.
    2. Change directory to %windir%\system32\macromed\flash
    3. Run flashutil9b.exe -uninstallUnlock
    4. Run flashutil9b.exe -uninstallSafeVersions
      *** If you see a dialog for step 2 or 3, select "Don’t Install" and try the step again. You probably had a typo.
      *** If you see an error "flashutil9b is not recognized …", install Flash as described below and let us know what happens.
    5. Delete flash9b.ocx
    6. Delete flashutil9b.exe
      *** If you see an "Access is Denied" error, it means Flash is in use and you must close all apps besides the DOS command window.
    7. Reboot your machine

This worked fine for me after reinstalling and all is now well, but if you're still struggling, Adobe has a Flash player forum where many complaints and some solutions are being offered.