Hey all, I fixed my own problem, but found an interesting error.
My student is using Win XP with the Russian (Cyrilic) character set and the problem was that project was in a path that had a Russian name C:\Documents and Settings\Askhat\{Russian name for Desktop}\Project
Turns out CF 7.0 chokes on that Russian character string for desktop...
If any CF support people read this, just thought I'd pass it along.
Mark