Hi Bob,
I just tested this behavior on my machine and was able to successfully create and use the dll and m files in Matlab. I have LabVIEW 7.1 installed with MIT 1.0. I think your problems must be due to a bad-installation. I would recommend uninstalling and reinstalling LabVIEW 7.1 and MIT 1.0 on your machine. If that still doesn't work, I would try uninstalling LabVIEW 7.0 & 7.1 and then just reinstalling LabVIEW 7.1 and MIT 1.0. If that doesn't work, I will be amazed. If that still doesn't work, try installing LabVIEW 7.1 and MIT 1.0 onto a clean machine just to verify that you are able to do so.
And yes, to use the created dll and m files in Matlab, you will need to have these three things installed on the distribution computer:
1) LV RTE for the version of LabVIEW that was used to create the files.
2) MIT RTE
3) Matlab, obviously
Hope this helps,
Travis H.
LabVIEW R&D
National Instruments