A web search revealed this problem to be pretty old with dozens of references to the apparent solution. It seems that Alan LaMielle should get credit for posting the solution first.
The Solution
First, make the following registry changes (on the Windows 7 'server'):
Windows Registry Editor Version 5.00
[HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Session Manager\Memory Management]
"LargeSystemCache"=dword:00000001
[HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\services\LanmanServer\Parameters]
"Size"=dword:00000003
Then, restart the server (or reboot):
net stop server
net start server
About The Solution
In some other versions of Windows, there is an option in the Network section of Control Panel for optimizing the Server for file-sharing. In Windows 7, you have to make the registry changes yourself. Although Alan LaMielle helped many Windows 7 users figure this out, it had previously been described in Microsoft's How to Optimize Windows NT Server Using the Registry:
When you configure one of the four options for the Server service, the
information is saved to the following two registry keys:
HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Services\lanmanserver\parameters\size
Your choices for this registry key are 1, 2 and 3.
1 = Minimize Memory Used
2 = Balance
3 = Maximize Throughput for File Sharing and Maximize
Throughput for Network Applications
HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\SessionManager\MemoryManagement\LargeSystemCache
Your choices for this registry key are 0 and 1.
1 = Maximize Throughput for File Sharing
0 = Maximize Throughput for Network Applications
Answer source (SF.SE)