I want a user account for Windows 7 that can only play media files already stored on a hard disk drive AND disable any kind of installation. Basically, have minimum rights necessary to play media files on the hard disk drive and browse the Internet (risky but how to safeguard?).
I think the trick here is not in accounts types, but in file systems permissions.
First, disable simple file sharing, then right-click on the user's user folder and you should be able to set permissions.
I suspect turning off write and execute for that user should do the trick, as well as taking away writing rights in folders where it's not needed.
Under Control Panel | User Account | Manage another account create a new standard user.
Once that is done, under control panel click on parental control and restrict the user to your liking.