I believe .signupform-extra needs an explicit height or at least an explicit line-height, to match the form. Try giving it a height and a line-height of 45px.

Err, didn’t realize that div was set to inline. Browser’s never agree on line-heights, and IE is especially fickle with block-level elements being set to inline. Floating is easier in this case. Replace

.signupform-extra {
display: inline;
}

form#mc-embedded-subscribe-form {
display: inline;
}

with

.signupform-extra {
float: left;
line-height: 47px;
}
.signup form input {
float: left;
}

You can see it working here:
http://clients.sleepoversf.com/robinsloan/

And here it is in IE7:
http://clients.sleepoversf.com/robinsloan/ie7.png

Nooo! An unnecessary apostrophe slipped into that last comment!

P-E-R-F-E-C-T.

Thank you. I really appreciate it.

Damn, Robin, I forgot you also have a separate blog. Nice design!