I'm having a version of this problem too - ran 220.127.116.11 with IE6 for a long time with no problems. On initial try-out of IE7 it seemed to work fine. Transfered RFT to a new, mostly empty workstation (XP with IE7) and it went in the crapper: very slow playback and at a certain point (not always the same point either) playback would stop entirely and the browser would often (but not always) close. Attempting to record was fruitless (open browser would close immediately).
Verified that environments were set right and that JRE had not passed 1.5.
Went back to old machine but honeymoon was over - RFT exhibited same problems. Tried deinstall and reinstalls; no joy.
Have had PMR open with IBM since 23 Aug - tech is not knowledgeable, notoriously bad at following up - worst (non)support I've had in 6+ years dealing with Rational and then IBM!