Thanks, that post helped a little. For anyone else who had problems after upgrading to sp2 RC:
You have to uninstall waik 1.1, install (or reinstall sp2 RC) and then install WAIK for Windows 7.
I also had to reinstall IIS and everything that was depending on it, I used these instructions to do so: http://blogs.technet.com/configurationmgr/archive/2009/08/12/configmgr-2007-how-to-properly-reinstall-iis-in-windows-server-2008-on-an-sccm-2007-site-system.aspx
worked great.
As far as the optiplex 960 error, I determined that it was actually a problem with my test computer, not my environment. It's always the easiest solutions that you overlook.