Anyone of you who uses IE7 has come across it, in Umbraco, localLinks are not made correct. See here for deails. IE7 tries to think for you, but it messes up the { and } characters. To fix it, do this: Download the file and place it in your umbraco/js/ folder. Clear your caches, ashtrays and whatever needs cleaning and then try again. Woohoo, it works!
UPDATE: Apparantly it only works the first time a link is created. When you edit a page with a link on it, it breaks again. If interested, leave a comment and I'll send you a slightly modified umbraco.dll which also checks for the locallinks generated by IE7.