IE 7 tabs missing in managed enviroment with Turn on Classic Shell setting Enabled

I have investigated an issue when IE 7 tabs not working after upgrading from IE6. All options was configurable in Internet Options but the customer had a managed environment with GPO’s. Some settings was configuring IE (User Configuration > Administrative Templates > Windows Components > Internet Explorer) but removing these didn’t solve the issue.

When I denied applying GPO’s from the main “user settings” GPO the tabs worked within IE so it was clear that a setting within that GPO prevented the IE 7 tabs.

After some investigations I found that the setting for Turn on Classic Shell removes IE7 tabs.

Turn on Classic Shell
User Configuration > Administrative Templates > Windows Components > Windows Explorer

If “Turn on Classic Shell” is set to Enabled then IE7 tabs will not work.

The setting with GPO configures the following registry key:
HKCU\Software\Microsoft\Windows\CurrentVersion\Policies\Explorer\ClassicShell (REG_DWORD)

• 0 = Disabled (i.e. no classic shell
• 1 = Enabled (i.e. classic shell active)

Explanation of GPO setting (from ADM file):

This setting allows you to remove the Active Desktop and Web view features. If you enable this setting, it will disable the Active Desktop and Web view. Also, users cannot configure their system to open items by single-clicking (such as in Mouse in Control Panel). As a result, the user interface looks and operates like the interface for Windows NT 4.0, and users cannot restore the new features.

Note: This setting takes precedence over the "Enable Active Desktop" setting. If both policies are enabled, Active Desktop is disabled.

Also, see the "Disable Active Desktop" setting in User Configuration\Administrative Templates\Desktop\Active Desktop and the "Remove the Folder Options menu item from the Tools menu" setting in User Configuration\Administrative Templates\Windows Components\Windows Explorer.

I haven’t found any explanaition on the web explaining why IE7 tabs aren’t available when using “Turn on Classic Shell. I have sent an email to Microsoft and hopefully they will provide me with an answer and if they do I will update this post.

Update (14 January)
Today I recieved a mail from Microsoft (IE Team) regarding the issues above with at link to a blogpost. This describes the issue but do not explain why IE7 uses the setting, the mail came from Eric Lawrence who also posted information in the comments of this post.

Link to the blogpost describing the issue. (see down in the post on the ClassicShell registry key)