I'm using Windows XP, but German version of Windows XP. The default paths on a German version would be

C:\Dokumente und Einstellungen\username\Anwendungsdaten\IDMComp\UltraEdit

for the UltraEdit application data directory of the user, and

C:\Programme\IDM Computer Solutions\UltraEdit

for the program directory of UltraEdit. I wrote "would" because on my computers there is nothing as Microsoft as defined as default for Windows XP because I don't like directory and file names with spaces and long directory names for program directories. Therefore I modified most of the default paths in registry and in the INF files of Windows immediately after first start of Windows XP showing the desktop. I have done this with Windows 95, with Windows 98 SE and with Windows XP and have had never problems with the modified paths because most installers look on the paths of the directories in registry which of course every installer should do because even the standard paths differ from one localized Windows to another localized Windows. (There are exceptions like installations of applications from Intel, Orcale, Dell, ... the larger the company the more they think can define their own standards.) Therefore on my computer the users application data directory is

C:\Settings\username\Appdata\IDMComp\UltraEdit

and I installed Ultraedit into directory

C:\Programs\UltraEd

When UltraEdit starts the first time under a user account, it creates %appdata%\IDMComp\UltraEdit\uedit32.ini and sets in this file

[SpellChecker]
DataDictDir=UltraEdit program directory
HomeDir=%appdata%\IDMComp\UltraEdit\

which results on my computer with definitely not standard directories in the INI entries:

[SpellChecker]
DataDictDir=C:\Programs\UltraEd
HomeDir=C:\Settings\username\Appdata\IDMComp\UltraEdit\

Long time ago I changed in Advanced - Configuration - Spell Checker - Dictionary Directories the Personal data directory to a different directory for keeping my personal dictionaries when switching to a different version of UltraEdit which normal users don't need, but I do that quite often to be able to test new versions of UltraEdit or to help users not using currently latest version of UltraEdit. To be honest I have all my UltraEdit related configuration files by default not in the application data directory of UltraEdit for the same reason and for being able to quickly test like here for this issue how UltraEdit works with default settings because my settings are far away from UE's defaults (except the menus which I never use for myself).

Therefore I'm really wondering that UltraEdit has set the directories initially wrong on your computer. That your computer is running Windows 7 is surely not the reason. Is it possible that you have copied your uedit32.ini from a different computer running Windows XP where the paths were correct?

However, open Advanced - Configuration - Spell Checker - Dictionary Directories and set the Aspell parent directory to E:\App Install UE because this directory contains GNU\apsell as you can read in the configuration dialog. And set the Personal data directory to whatever directory you like and were you have full control (read/write permissions) with your account.

As I have written above the default path for the personal data directory is %appdata%\IDMComp\UltraEdit\ and you find out which directory this is on your computer by copying this path, pasting it into the address bar of Windows Explorer and pressing key RETURN. Then Windows Explorer resolves the environment variable APPDATA and shows you the real name of this directory and its content even when the application data directory has the hidden attribute set as it is Windows default and so you can't browse to this folder by default because hidden files and folders are by default not displayed in Windows Explorer. Microsoft prevents users by default looking into the directories used by the applications to store user related configuration settings when not using the registry at all. The reason for this behavior is quite easy to understand because for most computer users nowadays the statement "they don't know what they do" is 100% true.