I hate to chime in this late in the process of trying to solve this but I was having exactly the same problem (for months) and finally solved it.
Things that didn't work:
- Reinstall Windows 7 as an in-place upgrade.
- Upgrade to Windows 8 (improved the situation but didn't fix it)
Things that did:
- Create a new user account, fixed it until I transferred the settings from the old user account.
- Fixing the color management settings.
So before reinstalling I would suggest creating a new user account and trying the printing while logged into the new account. If the picture printing wizard works while logged in with a new user account, the problem is specific to the settings for the user account with the problem.
To check the color management settings try this:
- Click Start
- Type color in the search box
- Click Color Management in the search results
- Click the Advanced Tab
- Make a note of any settings that do not start with System default
- Change all settings that are not listed as System default to system default
- Close the color management dialog and try the printing wizard again
In my case it was a corrupt Adobe color profile causing the problem.