Last week, I went back in time when one of my friend asked me to help on his site developed in classic ASP. He wanted to deploy this on IIS 7.0 and was getting all his Application variables empty. First, I thought there will be one more global.asa in one of parent directory. But there was no other global.asa file and the worst part was all session variables were working. Finally, I was able to fix this by converting the site from Virtual directory to an Application in IIS 7.0.
So, to make your classic ASP site which is using Application variables work with IIS 7.0, deploy it as an application and not virtual directory. Glad ASP.NET came :-)