Sadly, if a game is associated with Steam then it needs to be online the first time you install it just to activate and update to the latest patch. As for your problem I'm not sure what to suggest. Google is a good bet, or their support forums. You could also check to see if Steam is in offline mode? Just click file and check what it says there, although I'm sure you've tried that but just checking. Also is your steam client up to date?
For the record I'm running Windows 7 as well, it works fine and I like Steam.