I tried creating an environment variable and editing the hintpath to use that, a nice feature of Delphi 7. But, that didn't work and I couldn't find any obvious way of handling this in the IDE.
Google to the rescue! After a quick search, I found a blog posting VS.NET and hintpath problems... on Serge van den Oever's blog. This little trick did the job.
A fix to this is setting a registry entry to the folders with shared assemblies, if the assembly can't be found, this path is checked. Add a key with any name to
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\VisualStudio\7.1\AssemblyFolders, and set its (Default) value of type REG_SZ to the path with your assemblies.