T40 has a lowly 32MB ATI 7500 .... Win 7 will work, but slow as molasses in the graphics area. Switching off Aero will improve some.
I have a T40 running Windows 7 Ultimate with the 32MB ATI 7500 .... but I have no need for the megabucks Office 2010.
I don't think that Aero can be turned off for the ATI 7500 since it can't be turned on in the first place.
The OP should make sure that he/she is using the best graphics driver for the Win 7 ATI 7500 config and not the default one supplied by Win 7. With 2GB of memory, my T40 does run better on Win 7 than it did with XP (probably due to better memory management in Win 7) and everything is fine with the graphics.
The best ATI 7500 driver for Win 7 can be found here :http://k1dugar.110mb.com/~downloads/atiixpag.zip