I see W7 seems to have more support for virtual folders, that don't correspond to actual directories on the disk. Does it also support proper symbolic links so I can e.g create a symbolic link c:\temp\external which maps to d:\xyz\, so that c:\temp\external\file.txt is d:\xyz\file.text? If so how do I create these?
NTFS had the feature for some time, junctions have been available longer, and Vista was the first version of Windows with support, Windows 7 has improved it, apparently, but I'm not sure of the specifics off the top of my head.
From within an elevated (run as admin)
You can use the available flags to adjust the type of link created:
Yes! I missed this feature in XP but they did add it in Widows 7. check out http://www.windows7home.net/how-to-create-symbolic-link-in-windows-7/