I don't see why it wouldn't, as it runs for me on Vista, and the full version has run for several people on 7. Did you install the DirectX Runtimes?
Probably didn't. It's just as soon as I click the program to run, I get a error saying that it stopped working right on the spot. I'll try it out later on.
I've updated the Lite version, it now has the random control mode, and a new mode where Sonic follows the mouse, while also responding to keyboard input (like Tails in the games). I also added a toggle for sound effects, and increased the frame delay from 16ms to 32ms, because I didn't realize how fast it would run while debugging it (the debugger slows it down). Edit: And now the full version of WindowsZone and extras are available on the wiki.