Security researcher Tom Ferris exposed a vulnerability that causes the application to crash or execute arbitrary code when a user visits a specially crafted website.
A Microsoft employee wrote on the Internet Explorer Blog that this problem is caused by stricter URL-scheme handling in the browser and that the company is working on a fix.
Other testers reported issues with McAfee's antivirus software in which users were unable to launch the McAfee Security Center.
The browser also appears to have problems working together with several anti-spyware applications, according to numerous reports on a Microsoft mailing list.
The anti-spyware software can prevent a file called 'msfeeds.dll' from being registered. A Microsoft employee provided a workaround on the list, but this requires relatively advanced computing skills.
The browser is also unable to contact several online banking sites. Microsoft attributed this to a browser check which requires Internet Explorer 6 to be built into the online banking application. These issues are unrelated to the browser but require a fix by the bank.
Microsoft launched the second public beta, or " preview", of Internet Explorer 7 browser on Tuesday. The company released the application for testing purposes only and called on users to post questions or problems on a newsgroup.
The vendor is also asking website operators to test their sites for the forthcoming browser that is scheduled for release by this summer.
The second public beta can be downloaded here.
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