guimap - are you sure you are exiting all version of IE before running recording the test? You don't have a Test Director session open? Other applications that are web based?
Just to make sure, before you launch IE the next time, go into the Task manager and make sure there aren't any iexplore.exe processes running. If there are kill them and see if you still experience the same issue.
If that is the case, there is a set of DOS comandline tools you can download from www.sysinternals.com where one of them is pskill.exe which will allow you to kill all open processes that you specify from the start of your script.
Insanity: doing the same thing over and over again and expecting different results
The problem was due to the fact that the Web dlls were not registered while installation.I registered the WinRunner WebTest DLLs by running the following command
regsvr32 "C:\Program Files\Mercury Interactive\WinRunner\arch\acx_gvf.dll"
regsvr32 "C:\Program Files\Mercury Interactive\WinRunner\arch\ie4_trap.dll"
regsvr32 "C:\Program Files\Mercury Interactive\WinRunner\arch\web_gvf.dll"
The WR 7.5 is indeed compatible with I.E 5.5 as you mentioned :-)