It may just be because I already run Windows 7 on multiple tablets with touchscreens, but I'm confused by this. Windows 7 is touch friendly already. Do people really think that “touch friendly” means that you have to have a kiosk-like interface? It's okay if you WANT that on a large device, but you don't NEED that on a large device. It's not the fault of Windows 7 that touch is a lousy user experience on larger devices with high-enough resolutions to resolve small details. Over-sizing everything on the screen to accommodate the occlusion and inaccuracy of passive touchscreens just highlights how terrible of a user input modality touch is. This example takes things to an extreme.

When I watched this video, I didn't see “touch friendly”, I saw “cell phone like”. What a terrible user interface for the target device. It's not a phone, and all of these phone-like overlays will fail on large screens in the Windows world.

You need to tweak your thinking about displays and interfaces when you're talking about touch. Nowadays, people are pretty good at understanding what it means when you buy a larger or higher resolution screen for ordinary computing. In the case of the former, information is presented bigger, and in the latter, more information is presented. Touch is different because it's physical and not visual. For example, if you go out and buy a kitchen table that's four times bigger than your current one, then the implication is not that you have to go out and buy plates, bowls, glasses, and silverware that are also four times bigger (although you could). The implication is that you can fit four times as much on your table as before. Similarly, suppose one of the windows in your home was made four times bigger. That wouldn't mean that when you looked through it you'd see the same stuff as before but just four times bigger; it would mean that you'd see four times as much of what's outside. The physical world just works different that way. The important think is neither the dimensions, resolution, or DPI of the display. The important thing is the apparent size of on-screen objects because you're going to try to touch them as if they were physical.

Take your favorite touch-based phone, put it next your Windows 7 computer, and adjust the DPI until your onscreen elements like text, icons, and widgets are comparably sized. According to your own expressed preferences, the Windows 7 device should now be just as touch friendly as you find your phone to be. It should be just as usable as your phone, and far more useful because there's far more space to use. However, it will not look like a silly kiosk designed to help 3-year-olds with little computing background get on youtube and browser for cartoons.

@aftermath:
Man, relax! It's not worth making such a big fuzz about it

I've been using Windows 7 on my Asus R2H since it is out there and I am very happy with it!

The only thing I mean with “touch friendly” is:
-While I am in the car larger buttons etc can be pretty useful
-I have a resistive screen and sometimes it is hard to find the correct angle to scroll down.

Its great to see this UI layer over Windows 7. Windows 7 is an extremely powerful OS, so something that provides touchscreen friendliness to harness its power is very welcomed. My biggest concern was browsing (I have an EXOPC), as none of the existing browsers are really touchscreen friendly, until I found this WCS Touch Browser. I don’t know how many people know about it yet, but I saw it advertised on the EXOPC forums, and it is the best browser I have ever tried. It esepcially shines on a tablet though and has a lot of unique features. I spend almost 50% of my time with EXOPC on browsing anyways so this was a godsend.

Yup, the project is dead:

http://liliputing.com/2010/10/macallan-ui-for-windows-7-tablets-is-toast.html