Have you tried "recompiling" from the .klc file source using MS Keyboard Layout Creator? (If that works on Windows 7)

I am using Windowd 7 Beta. I was able to install the standard (non-beta) colemak keyboard, but did have show stopping issues.

My installed keyboard configuration is:
  US -> Colemak (alt+shift+1), US (alt+shift+2)
  Korean -> MS Korean IME 2000 (alt+shift+3)
  (toggle language) -> (alt+shift)

At first the only issue I had was the alt+shift+3 command would not switch except in Windows Explorer. alt+shift could still toggle so this was not the end of the world, just annoying. alt+shift+1 and alt+shift+2 worked fine.

After a few days use I started losing the ability to use alt+shift+1 to switch to Colemak: I would boot into US and be stuck there. This is also the point where the the keyboard "properties" for Colemak stopped working (if I pressed it the keyboard layout viewer program just crashed). For anyone unfamiliar with the 'properties' button (I had not seen it in WindowsXP), here is a screencapture:

I could solve this issue very temporarily (until next system restart) by removing US keyboard so only Colemak and KoreanIME remain, but after restart Colemak fails to be switched to again (resulting in being stuck in KoreanIME). Also I like to have the option to switch back to US for when anyone else gets on my PC.

So... I don't have any solutions yet, but hopefully some more info helps.

It's not a keyboard driver at all, but a system layout we're talking about. It's a .dll file that tells the winuser.h component which scan code does what (including modifiers, dead keys and whatnot) when called, as I understand it. A keyboard driver would make sure the scan codes got into your system in the first place, and also run things like the LEDs and special stuff; have a chat with the keyboard's microcontroller as it were.

The MSKLC doesn't allow more fancy remappings like CapsLock (or other special keys, or the NumPad for that matter). Keyman by Tavultesoft could do those things I think, but apparently with Vista it didn't work anymore because of new security policies from Microsoft. Windows has become more finicky about just what it accepts input from these days, which I guess makes sense from a security point of view, but it does make remapping harder. I think that's where it's stopped for the so-called 'Colemak beta install', too - Shai was mentioning Keyman before as a means to getting everything including the CapsLock key into one install.

If the .reg file doesn't do anything, that's a bit annoying. It's supposed to create a key under the registry path HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Keyboard Layout that holds the values for remapping incoming scan codes to other, virtual scan codes (i.e., at a very low level for the system). Very useful; I hope Win7 doesn't remove this possibility for us.

I don't use the CapsLock remapping anymore myself, in part because it's harder to do than the rest. I also like to reserve that key for 'extend/transpose' mappings in PKL and otherwise, using it as an extra modifier key instead. Very useful.

Regarding the Alt+Shift+# mappings getting lost, I've seen similar things happen on WinXP. I think it's a general weakness of that part of the system.

Hi, the registry caps->backspace is working now for me. I am not sure what I was doing incorrectly, but no matter it seems I am wrong about this *.reg file not working in Windows 7.

I am currently using the caps-backspace.reg combined with the installer made from opening/resaving/rebuilding the colemak klc file with the newest MKLC and it seems to be working. It has survived several restarts and even better my 'alt+shift+3' toggle directly to Korean IME is working now.