Yes you can use a CAC with windows 7. Most of the AF cac readers that are USB need a firmware update to work with Vista/Win7. Also, there are a couple of tricks needed to install it. You will need to use the compatibility mode as well as install the C++ redistributable program included in the Home Use zip file. If you need help, PM me. If enough people need help, ill post full details online. (Im the computer guy for our unit).
BTW, windows 7 is money! Much faster than vista without the crashes. If you buy the upgrade, do a clean install instead under the custom settings when you boot from the disk. Most of the guys I know have problems with the vista to win7 direct upgrade.
Cheers,
Mclovin