VAG is supported under Windows 7, as I run with it. It does need admin priviledges to work, although you can still get to the front screen if you run it as a normal user. There have been discussions about problems with 64 bit versions, but as I run 32 bit I can't really comment.
As VAG 409.1 is getting on a bit now, can I suggest getting vcds-lite from Ross-Tech? It's much better for Windows 7 and you might have a bit more luck.