Tracey, I have recently upgraded to Windows 7 and have just discovered how to erase red-eye with Windows live gallery.

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Right click and open your photo in Windows Live Photo Gallery

Click 'edit, organise, or share' at the top left. (at this point you may have to log-in or join if you haven't already)

click (or double click) the picture you want to edit.
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Only does basic stuff but could be useful, especially for red-eye.