I am at the moment testing Internet Explorer 7 on my standby computer and have noticed that Password Agent is not imputing the name and password correctly. It only seems to put in 7 of the 8 password characters and sometimes it just jumps to a completely different web site.
I have the same issue and I am not using the toolbar for autofill. It seems that there is a timing issue to jump to the application, and back and that it is losing the first character on the way back. I have been able to get it to work sometimes and fail others.
This is exactly what is happening. Sometimes it works like today, were I have not had a problem but yesterday every time I used a web page to log into I had to always put in the first character in my login and password lines. I also noticed yesterday that sometimes the page would change to another web address when I pressed the keys to autolog.
Had a similar issue with another progam maybe same solution will work for your IE7 issue. I fixed my applications bad behavior by changing the "template" of password agent wait for 1/5 second both before and after each of the username/password variables. Here is my template for that PA entry.
BTW, I myself use IE7 RC as main browser as well and have seen no problems in this field. But I use classic interface (without themes) in Windows and it is possible that when themes are enabled there are some issues because these need a lot of resouces to draw and that may cause this "timing issue".