I believe that this is setup out of the box correctly for Win7. Do you get errors when you validate the snapshot providers or the service providers from a command prompt? run the command prompt as administrator and verify with the following commands
vssadmin list providers
vssadmin list writers
I would not think you should have to manually enable or change settings to the services. Any event logs, any other errors reported? Something happens locally to it either by applying the BL or before the BL and this causes the failure. I would recommend you check the VSS status before and after and see if they are in a error state and if there are any windows event logs that correspond.
