I've had no success with older versions of browsers, but older versions of Windows work fine.
I have now created 2 identical virtual machines running clean installs of XP Home SP3, IE7, FF3.5, Avast AV and Windows firewall. I disabled updating on one, and let the other one update itself. They both worked at first, but now the updated one is "broken"
Add this info to my post above and you get:
XP Home SP3 not updated- ok (2 physical machines plus a VM)
XP Home SP3 updated- not ok (2 physical machines plus a VM)
Vista Home Premium SP1 not updated- ok (1 machine)
Vista Home Premium SP1 updated- not ok (1 machine)
7 Ultimate (Build 7000)- not ok (2 machines)
7 Ultimate (Build 7100)- not ok (2 machines)
So a clean install of XP or Vista in a VM will work for you. Of course it's a workaround, but I'm not an IT professional and I have no idea what has changed to make it so.
When it works, it works with any firewall (M$ or ZA), any AV (AVG, Avast) and any browser (IE7, IE8, FF2, FF3, FF3.5, Chrome. It also works with both my devices (Netgear router, Senao AP)
When it doesn't work, it doesn't work with any of the above or even with all security disabled. The way to make it not work is to have an updated OS. That's the common denominator, tested to death.