No he won't be able to use any later version of the track ir software, but that one he's using 'might' work fine on win 7. (Edit, seems not to)
As for the ffb, its the profiling software that doesn't work the sticks fine, good to see that Microsoft don't know jack about there own products.....
I'd look on ebay and try to pick up a cheap trackir 3 or 4, there so much better than the 1 anyway, if you look around you'll get one damn cheap. a very quick look around i saw a trackir 4 for 120 US dollars.