Microsoft has confirmed a problem that hundreds of users have reported with downloading Windows 7, according to its support forum.

The company is currently investigating the reports, but has not yet come up with a solution.

"For those that have purchased Windows 7 from Digital River and receive the error 'We are unable to create or save new files in the folder in which this application was downloaded' when going through the 'Unloading the Box' [step]...Microsoft and Digital River are aware of the issue and it's being investigated," a Microsoft support engineer said in a message posted yesterday: http://social.answers.microsoft.com/Forums/en-US/w7install/thread/cb679e27-f2e6-4cd5-b708-a4992cec5a9d

"We will post back to this thread when we have additional updates," added the engineer, an 11-year veteran of the company identified only as "Michael."

Minneapolis, Minn.-based Digital River powers the downloading of Microsoft's $29.99 Windows 7 upgrade offer to students . Digital River handled the electronic purchasing and downloading for Windows Vista and Office 2007 in early 2007.

Users began reporting problems with installing downloaded copies of Windows 7 within hours of the operating system's launch yesterday. In a thread that contained more than 320 messages as of 1 p.m. ET Friday, users complained that they were stymied by the issue. "I double click on 'Win7-P-Retail-en-us-x64.exe' and I get the message 'Unloading the Box'," said "Darkfrye50" early Thursday morning. "Once the status bar reaches the end, I get the error.": http://social.answers.microsoft.com/Forums/en-US/w7install/thread/aedb1245-f8f9-42ec-9a0c-1aa932363bbb

"What a freakin' mess," exclaimed another user, "Goaliegeek" on the same thread.

Many of the users said that they were students taking advantage of Microsoft's discount upgrade.

Rather than provide customers with a disk image, or .iso file -- which could easily be burned to an installation DVD -- as Microsoft did with the Windows 7 previews it supplied users this year, Digital River delivered an .exe file named "Win7-P-Retail-en-us-x64.exe" and two additional files with the ".box" filename extension.

When users launched the .exe file -- which was supposed to unpack the .box files -- they received the error Microsoft's Michael mentioned.

Microsoft suggested that users try one of the workarounds spelled out by others in the support forum. At least one of them, which required users to fire up a command-line tool called "Oscdimg" to create an .iso out of the downloaded files, did the trick, people reported. Oscdimg must be downloaded from the Microsoft Web site; it's available as part of the "Windows Automated Installation Kit" for Windows XP and Vista: http://www.microsoft.com/downloads/details.aspx?FamilyID=c7d4bc6d-15f3-4284-9123-679830d629f2&displaylang=en

The Download Squad Web site has also published a set of instructions on converting the downloaded files to a disk image: http://www.downloadsquad.com/2009/10/22/how-to-make-a-dvd-of-that-student-only-windows-7/

But users continued to post complaints. "Any updates at all on this? This is a horrible 'new start' for Windows," said "gozeemer" on the long thread.

"This is also ******* me off," griped "James388" on the thread. "Seems like my download is corrupted also, it won't let me download it again. WTF?!?"

Digital River did not immediately respond to a request for comment Friday.

(PCW)