I upgraded my IQ506 to Windows 7 and other than no sound, everything works fine with the PDC build of Windows 7. Apparently even the sound issue can be resolved by uninstalling the HP sound driver and rebooting - Win 7 then installs a generic driver that works. (I haven't yet tried this, but it was reported by another user to work)
I documented my experiences here:
http://www.multiplefingers.com/blog/post/Getting-Ready-For-Multitouch-How-To-Install-the-PDC-Build-of-Windows-7-on-your-Touchsmart-PC.aspx
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