Old Nokia S40 SDK 2.0 v1.1 running on Win7 ?

Yes, it is possible, although installer doesn’t permit installation on this OS.

Workaround? Install on WinXP (especially VMized), and copy whole C:\Nokia directory to your host Win7.
Emulator works like a charm, SDK is sniffed by NetBeans 6.9 (Platforms/Add new platform), debugging from NetBeans 6.9 not tested yet.

One more problem – request SDKs serial number manually via forum.nokia.com…