So, have you figured out how to make the Merlin work under 7? It won't execute for me. I have the thumbnails but when I select to fly it, FS goes into some sort of "FS 2004 is not working..." mode. I think I may be having problems with the Sounds.dll folder/files. I am not sure I need to drop the entire folder into the Sounds.dll folder, or if I need to drop individual files into the Sounds.dll folder. I'm kinda busy now; have to do it later.
I don't have Win 7, so I have no idea what the problem could be. For fs9, you don't need a thumbnail in the texture folder, so that's not the problem.