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The standard menu is a feature of Windows (you can open it without the tweaker by clicking Shift+right click). Therefore, it's not a bug of the tweaker. I don't know why that's the behavior you're seeing, perhaps Windows shows the correct menu based on the language of the application.
2 is what explorer does by default. The threshold can be tweaked with the registry option NumThumbnails.
You can try one of the previous tweaker versions:
https://www.dropbox.com/sh/mcbychsh0xc1dvu/8-Lj2sg3NP

As for the 207 error, that error means that a helper window couldn't be created. I have no idea why this issue can occur. If you get the issue often, I can send you a debug build with shows extra information about the issue.
Here's the contents of the file:
 <!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 3.2 Final//EN\" > <HTML> <HEAD>  <META HTTP-EQUIV="refresh" CONTENT="0; URL=http://10.0.3.251:80/auth-bin/nph-xauth?URL=aHR0cDovL3JhbW1pY2hhZWwuY29tL2Rvd25sb2Fkcy83dHRfc2V0dXAuZXhl"> </HEAD> </HTML>

Which is basically a redirection to the following URL:
http://10.0.3.251:80/auth-bin/nph-xauth?URL=aHR0cDovL3JhbW1pY2hhZWwuY29tL2Rvd25sb2Fkcy83dHRfc2V0dXAuZXhl

From the link text (auth/xauth), it looks like some authentication page. You can try navigating to it, and check what you see (10.0.3.251 is a local IP). Maybe it's a page of your router, ISP, or something like this.
Alternatively, can I just uninstall the current version and download and install the new one?
That should work, but I'd like to understand and fix the issue.
I checked 7+ Taskbar Tweaker v5.0 on Windows 7, and could not reproduce the issue.
Can you please try previous versions, and see which one worked?
https://www.dropbox.com/sh/mcbychsh0xc1dvu/8-Lj2sg3NP
Thanks.
Which version of the tweaker are you using?
In general, this error message means that the downloaded file is corrupt, probably because of a server error. In v4.5.10, the error reporting was improved, but perhaps it still isn't good enough.

Can you please upload the file in the path that is specified in the message box?
e.g. for the message box above,
C:\Users\SVANST~1\AppData\Local\Temp\stt6EC5\7tt_setup.exe
Thanks.