What are the elements of windows desktop?

The feature you are referring to is "Windows XP Mode", which is only available with Windows 7 Pro or Ultimate. There is a different feature that lets you set compatibility settings for individual programs in the related link. This compatibility setting isn't affected by BiOS settings. A couple of people have reported that PSE 7 works on Windows 7, and a couple have reported that they needed to set the compatibility to Windows XP.