Hello,
you need the SP5 and Upd1 for your S7-PLCSIM V5.4 or install STEP 7 Professional 2010 which included S7-PLCSIM and is compatible for Windows 7.
See also the informations under the following link:
http://support.automation.siemens.com/WW/view/de/51884395
With best regards
Cicero