Well, it can.  It even supports full Aero, which is a pretty impressive feat by both ASUS and Microsoft.

In fact, out of the box, everything except ACPI and the advanced touchpad features (and, of course, ASUS’s proprietary key shortcuts), but the XP drivers work for both.  However, it doesn’t have an optical drive, and none of the instructions out there for installing from a USB drive are complete.  This (I believe) is complete.

1. Get the beta
2. Create a bootable USB drive with the beta.  A few notes:
   1. Use a USB hard drive, not a SD reader and SD card.  The latter cannot be marked as active, so you can’t boot from it.  I didn’t try putting the SD card in the memory card slot in the 1000HE to see if that way works, though.
   2. The partition must be formatted FAT32, which is limited to 128GB.  If your drive is larger, you need to either resize the existing partition and create a smaller one (~15GB is more than enough), or nuke the whole thing, create a small partition.  If it’s not FAT32, you will get a boot error and the helpful option of “Ctrl-Alt-Del to continue”.
   3. If you don’t make the partition with the Win7 files active, you will just get a flashing cursor.
3. Install Windows 7 from the USB drive
   1. Turn the 1000HE off
   2. Plug it into the LEFT USB port (as in, not the ports on the right side)
   3. Turn the 1000HE on
   4. Immediately start pressing F2 to get into the BIOS.  Press it about 2 times per second until you see the EEE screen come up.
   5. Once you are in the BIOS, go to the Boot menu (press the right arrow key)
   6. Select “Hard Disk Drives” and press enter
   7. Select “1st Drive” and press enter
   8. Select the USB:xxxxxxxx option and press enter
   9. Press Escape
   10. Select “Boot Device Priority” and press enter
   11. Select “1st Boot Device” and press enter
   12. Select the USB:xxxxxxxx option and press enter
   13. Press F10 to save and restart
4. When the Win7 installer reboots, you need to either unplug the USB drive or switch the BIOS back to the HDD
5. NOTE: There now appear to be Windows 7 drivers available – just select Windows 7 as the OS.  I haven’t verified this, but it’s worth a shot.
   Download the following drivers (select Eee Family | Eee PC | 1000HE – then, when the box pops up, select WinXP as the OS)
   1. ATK | Advanced Configuration ans Power Interface Drive for WIN XP (currently v4.00.0010)
   2. Utilities | ASUS Instant Key Utility for Windows XP (currently v1.08)
   3. TouchPad | Touchpad Driver Version 7.0.4.3 (this enables multi-touch support)
      
6. Install the LAN drivers

Done.

A few points:

1. Right-click on the taskbar, select Properties, and check the “Use small icons” box.  The few extra pixels really do make a difference.
2. For some reason, ASUS’s hotkey utility throws an error on startup sometimes.  You can ignore it.  It’s saying that you can’t use ASUS’s hotkey program to switch resolutions.
3. Also, you can set the two hotkeys at the top by running EeeInstantKey from the start menu.

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