A friend has run into a problem where they installed Windows 7 from an external drive, and the internal boot drive is now assigned to H:. Theoretically this shouldn't cause problems because there are programming interfaces for getting the drive letter for the system drive. In practice though, there are quite a few programs that assume that C: is the only possible location for the system directories, and they refuse to run with the system directories on H:. That's not Microsoft's fault, but it's a pain none-the-less. The general consensus seems to be that a re-install, setting the internal boot drive to C:, is the only way to fix these problems.
UNIX-like systems display all file systems in a single unified directory tree and mostly seem to avoid problems like this. Is it possible to configure a Windows system without reference to drive letters, or does the importance of backwards compatibility mean that Windows will be working with drive letters from now until doomsday?