I think it may be drivers on your end. Win 7 is not 100% yet so some drivers are not right yet.
For a lan there should be no probs really, but then again just about all LAN fests becomed in reality a PATCH fest.
My recommendation:
Install winXP on a spare HDD and DG too, unplug yr win7 HDD and simply plug in the xp one when U wanna play.
Hard drives are cheap as chips, so have a spare OS handy for scenarios like this IMHO.