The problem is that Delphi 7 by default assumes that help files use the old WinHelp format, which was not sent with Vista. Even if your help file has a .chm extension, Delphi tries to display it using WinHelp commands. And since WinHelp does not exist, you get the error message that you reported.
There are various ways to make the help system display HTML help. For example, a general method is to implement an OnHelp handler for an Application object and route help to HtmlHelp API calls. I gave a very simple example of this in a recent answer.
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