I think your problem was based as R.C. and John implied, with the naming of your folders rather than where they reside. My setup has been, for years, installing the program in D:\Finance\Quicken ( is 07, 08, etc.).
My data files (Vista)are in C:\Users\Hank\Documents\Finance\Quicken\Accounts.
My automatic backups are in C:\Users\Hank\Documents\Finance\Quicken\Accounts\BACKUP.
Each time I upgrade, I install in the same tree with a new Quicken folder.