From CNET.com: It looks like Microsoft has decided to upgrade Internet Explorer before Longhorn comes out — a good decision, if they want to keep a strong hold in the browser market. A beta version of Internet Explorer 7 should be out this summer, based on the Windows XP SP2 operating system. Although they are looking at users of Windows 2000, they have not yet said whether IE 7 will run on that platform.
Although it seems that security is the major issue to be overcome in IE 7, Microsoft is being asked if IE will also come up to speed on web standards. No word on that yet.