Sebastian, thanks for your lead on this. I've got a local version of a remote install 6.2.4 and I've upgraded it successfully to 7.0. I have the same broken images (paths) issues. I bet my issue is a lack of setup understanding coming from the remote iis6 setup to the iis7 localhost setup.

Bruce Chapman's post is very helpful:
http://www.ifinity.com.au/2012/09/05/...

I'm stuck figuring our how to get the relative image paths to line up between the live site and the local.
the database content is filled with short paths: /portals/0/images/content/piesmall.jpg
on the localhost these translates into (http://localhost/portals/0/images/content/piesmall.jpg) and doesn't work.
because it needs the iis site name in the path (http://localhost/dnn7/portals/0/images/content/piesmall.jpg )

I've been through a dozen attempts from suggestions, but none have worked.

I note that I MUST have an 'Application' for the local copy of the site in the root of the default website in iis7. This is new from iis6. I can't add an Application to the 2nd website setup in iis7. It simply doesn't launch the site.

What do you suggest I do to adjust for the images/file paths? (so I can run completely offline - no remote services)