Stolen from the Visio 2007 forum. It works for me well under CO 8.0.0.
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Create a new blank Windows XP bottle
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Install Microsoft XML Parser (MSXML) 3.0 Service Pack 5 (SP5) into the bottle (msxml3.msi, http://www.microsoft.com/downloads/details.aspx?familyid=4a3ad088-a893-4f0b-a932-5e024e74519f&displaylang=en)
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Install Microsoft Core XML Services (MSXML) 6.0 into the bottle (msxml6.msi, http://www.microsoft.com/downloads/details.aspx?familyid=993c0bcf-3bcf-4009-be21-27e85e1857b1&displaylang=en)
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Install Microsoft .NET Framework Version 1.1 Redistributable Package (dotnetfx.exe, http://www.microsoft.com/Downloads/details.aspx?FamilyId=262D25E3-F589-4842-8157-034D1E7CF3A3&displaylang=en)
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Finally start the Project 2007 install