You can't modify the Hosts file or the Lmhosts file in Windows 7
This article provides a workaround for a problem where you fail to modify the Hosts file or the Lmhosts file in Windows 7.
Original product version: Windows 7 Service Pack 1
Original KB number: 923947
When you try to change the Hosts file or the Lmhosts file in Windows 7 with Service Pack 1, you may receive an error message that resembles either of the following.
Error message 1
Access to C:\Windows\System32\drivers\etc\ hosts was denied
Error message 2
Cannot create the C:\Windows\System32\drivers\etc\hosts file.
Make sure that the path and file name are correct.
This issue occurs even though you log on by using an account that has administrative credentials.
Click Start, click All Programs, click Accessories, right-click Notepad, and then click Run as administrator.
If you're prompted for an administrator password or for a confirmation, type the password, or click Allow or Yes.
Open the Hosts file or the Lmhosts file, make the necessary changes, and then click Save on the File menu.