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What version of the software are you running? I have successfully used version 2.5 on Windows 7 (which is essentially Vista under the hood). FWIW, unless you want to buy books from the Sony store, I'd recommend Callibre instead.
I doubt the problem is directly a result of Windows, especially not Vista as it is easily the most stable version to date.
The USB drivers for the PRS-700 crashed my PC when I first installed the software, but worked when I later tried again...
If you haven't already, I'd recommend removing all traces of the reader and software (including drivers for the device) and then try again.
Did you plug the device in and allow Windows to install the device drivers before trying to install the software? If not, try doing that.
And you could also try INSTALLING the software in Admin mode and/or XP compatibility mode. Doing that can resolve issues that arise due to the software creator not following Microsoft's Vista guidelines (e.g. the software trying to access folders or files that Vista protects but XP allowed access to).
Another generic thing you could try is to make sure Windows is totally updated with patches/updates. If the PC doesn't have SP1, then make sure you get that.
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