Does the labview.ini file on the client contain the path to the server before the pref:
z:\labview\labview.exe - pref c:\lvwork-labview.ini
I've never done this w/ LV 7, so I'm just looking at the ref doc, too. I'd also try it w/o the shortcut (just explore over to the server and open LV). If this works, remove the pref line from the shortcut (the ini file should handle this anyways). You can also try using the full path to the server, versus mapping it:
\\COMPUTER-ONE\C:\labview\labview.exe
That's about all I know.
G'luck
2006 Ultimate LabVIEW G-eek.