I'm not sure if anyone else has experienced this, but this has been the 3rd computer running explorer7 under XP and Vista that I've updated to the latest version of flash and the installation hasn't completed properly.
On XP, I've found the issue is it doesn't properly uninstall the previous version of flash. Compatibility Error causes no flash to run or even recognise it's installed, and until you manually delete the files it won't uninstall the previous version.
On Vista however, a manual flush doesn't do the trick.
I've come across a simple solution though, in $(Windows)\System32\Macromed there is a file called Flash9c.exe, run this (run as admin if on Vista) and it takes a couple of seconds. After this restart explorer and bingo you have it installed properly again.
I think the most annoying aspect of this bugged installation in this recent release of Flash, probably is the fact that half the time the adobe site itself when wanting to reinstall the driver will claim it's installed correctly and is up-to-date. Even more irritating is sites that just use flash without checking if you have it or not.. will work just fine. Biggest problem site I've come across for this issue has been YouTube as it claims you've turned off Javascript.
As I said I don't know how many people have come across this bug, but I hope to hell they fix it soon. No idea if it's present in FireFox as well or the Mac edition, but under Explorer it certainly as hell doesn't like updating. Bet some idiot has forgotten to set the script to run Flash9c.exe at the end of the file copying.