Is it possible to use DNN 4.07 with Mysql?  If so could someone help me with the following:

Integrating the latest Mysql for windows with IIS 7.0

Setting DNN up to use MySQL

My Development Machine: 

Windows Vista Ultimate

Browsers:  IE7 / Firefox 2.01

AMD x2 dual core processor (3.0 Ghz)

2Gigs RAM

If you really must use MySQL, there is a MySQL Data Provider available from SnowCovered that is compatible with DotNetNuke 4.0.3.

I don't know if this is supported for 4.0.7, but I have worked with the developer of this project to create a custom DotNetNuke data provider for a special application.  I can vouch for them.  If they don't support an upgrade, you might be able to contract with them for an upgrade, or sell you the source code.  You'd have to take on the task of bringing the provider up to a current version, but a good bit of the work may already have been done for you.

Make Portal wrote It's interesting to see the interest for other data providers such as MySQL has dropped off like this.  Is it because the demand is not there or there are technical difficulties implementing non-mssql data providers.

It is not a technical problem. I think the problem is that you can get cheap DNN hosting using SQL Server Express. If this did not exist then I think there would be more support for a MySQL provider.