Just for future reference; Explorer View / WebDAV does not work out of the box for SharePoint 2007 on Windows Server 2008 R2.
The reason for this is that IIS7’s WebDAV feature conflicts with SharePoint 2007’s own publishing features.
Solution:
- Remove the WebDAV feature from the IIS role (http://support.microsoft.com/kb/2171959) and reboot
- *OR* remove the WebDAV module from the SharePoint site within IIS and recycle the app pool
- Enable WebDAV authoring on the SharePoint site within IIS
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