Instead of adding it to the IDL path, what you will need to do is use the "Visual Studio 2005 Command Prompt" under the start menu under "Microsoft Visual Studio 2005" > "Visual Studio Tools" This will launch a command terminal environment that will be properly set up.  Now from that command prompt that you have opened, launch IDL just by doing this: >"C:\path\to\idlde.exe" -32   The -32 part is important, because only 32bit COM objects are supported for IDL as of the latest 7.0.6 release.  If you are running 32bit windows anyway, then you don't have to worry about the -32 switch. You could also try putting the Common7\IDE directory into the windows PATH environment variable, this may also fix this problem.  I usually use the VS command prompt option.  

aha, it does work now! Thank you so much. I confused the environmental variables PATH with the PATH in IDL!