Hello,

I am not quite sure regarding this matter...

I don't have installed 0.7.0, my old sites are still under 0.6.0 (and i won't switch now cause i am afraid of potential compatibility problems) but using 0.6.0 i would simply put Zend.php into your localhost, and also Zend folder....

I think (but not sure), your problem has to do with:

Using Zend_Controller in subfolder

Check this tutorial to see if you can solve something...