with a fresh install of the Nokia SDK
and all MIDP options checked results in a
"this directory selected is not a valid home for Mobile SDK"
when selecting the c:\S60\ or sub-directories with intellij 7.0.4.
downloaded a netbeans 6.1 mobile edition re-ran the Nokia SDK setup,
ran a MIDP sample project with success (emulator starts, program running in phone emulator).
Was someone able to use the Nokia SDK with 7.0.4?
And if yes: please share your setup steps.