Actually it is the changes in Win 7 that stop it working. I already had to do a totally different version for Vista (from the XP original) because the internal way the sytem handles the shell changed. It has changed a lot more for 7 and I haven`t been able to work out how to get it working again.
Or you may in fact be right and it is just getting ignored as a 32 bit hook. I don`t have win7-32 to test with

You could try my TView program. This is a standalone thumbnail browser that I used before working out how to hook into the ehell thumbnail system and have now gone back to again

The dlls will install correctly on 64 bit systems. The installer calls the system for the correct 32 bit paths so they should get put in syswow64 rather than system32 on 64bit systems (confusing I know but that is the way MS did it - 64 bit code goes in system32 for backward compatibility and 32bit code goes in syswow64... "system-windows-on-windows64")

PSD support in mwgfx is fairly limited. It only fully supports the original PSD format and the many additions over the years are either ignored or will actually prevent the file from being decoded. As it also discards any layer information it was only ever intended as a way to view PSDs rather than for editing or conversion. If it can`t decode the file it will try to extract the thumbnail that is often embedded so that at least you can view a low-res version of the image