Hi Chandru,
I would appreciate if you can answer each question I stated, this should help us understand this problem better. In additon to that, please confirm whether the Miscrosoft office.powerpoint was installed using the same User account or a different one. This seems to be lated to permissions some how, as Captivate requires admin level permissions to access Powerpoint, incase it was installed with a different user credentials (different level of access/permissions) this may result into such error.
Is your MS office 32 bit or 64 bit? and Is Captivate 7 64 bit or 32 bit?
Thanks,
Anjaneai