In a recent post, Microsoft announced that Exchange 2007 SP1 will be re-released to enable Administrators to install the service pack without having to rename their single-label domains*.  Microsoft supports single-label domain names for Exchange 2007 SP1 but recommends that organizations use fully qualified domain names.  Moving forward, Microsoft will no longer support single-label domain names.

For more information, refer to Single-label Domain Names and Exchange Server 2007 SP1 (Part Deux)

* Single-label domain names are names that do not contain a “dot” such as “root” instead of “fqdn.com”.