I have no conclusion. At this point, running a copy of XP's Movie Maker 2.1 in the Windows 7 beta is just an exercise to explore user options when in the first Windows operating system since Windows Me that doesn't include a version of Movie Maker .
Vista has MM6 and an optional download of MM2.6, I didn't set out to explore how well MM2.1 runs on Vista, but checked it along the way and found it works about the same as on Windows 7. I'm too cautious about the possibility of causing issues in Vista by adding MM2.1 into the mix. For example, MM2.1, MM2.6 and MM6 all use the same collection database file and you could too easily find yourself in the middle of unwanted complexities. In Windows 7 the MM2.1 and Window Live Movie Maker processes are far enough apart to not conflict.
Although I was successful at making a fairly basic movie, It's obvious that more is needed. Using still pictures in a project is a pretty basic need, and I would want to resolve the issue before recommending it for Windows 7 users. As another check, I copied MM1 to Windows 7 and tried using the same still pictures. They worked fine in the project preview and saved movie, a clue to it being an issue isolated to MM2.1 on Windows 7.
And then there's the needed permissions to do such a thing as copying part of an earlier version of Windows into Windows 7. I've suggested to Microsoft they offer an optional downloadable MM2.1 package for the community of Movie Maker users, as they did MM2.6 for Vista users.
I hope the final release of Windows Live Movie Maker gets there first, and is good enough to make the use of MM2.1 in Windows 7 just another fun excercise and not a needed work-around. Time will tell.