No, a manifest file used with an image prior to 7.5 will give you just what you saw -- scrambled widgets. Only 7.5 and later has the modified widget code to go with manifests.
On Windows XP, even with 7.5, there can be issues. It seems to vary from machine to machine -- some machines work fine, some take an exception before the image is even fully realized, some exhibit a combination of the 2 ends of the spectrum. This has been a very difficult bug to shoot since it seems to depend on which updates have been applied to Windows XP and does not exhibit the same symptoms in the debugger from run to run.
Bottom line, don't enable the manifests on Windows XP (yet)!
John O'Keefe [|], Principal Smalltalk Architect, Instantiations Inc.