Can you update the .NET framework on Windows 7 Embedded to the 4 framework?
You will need to make sure that the Windows Update Standalone Installer component is part of your image. According to this thread it should work.
I had this issue and as the MSDN article points out make sure the following packages are installed in your image of Windows Embedded 7. Using Image Configuration Editor or Image Build Wizard.
To automate the install of .NET 4.0 you could add a command line entry in Image Configuration Editor in the following way:
Insert-> Synchronous Command->Pass 7 oobeSystem C:\Setup_Files\dotNetFx40_Full_setup.exe /passive
Of course make sure C:\Setup_Files. contains dotNetFx40_Full_setup.exe. This can be done in Image Configuration Editor as well.