Want to install Sharepoint server 2007 sp2 on Windows 2008r2 with only local users and NO Active Directory. Is this possible?

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if you are done with the question, please specify an answer. Can you give feedback if nothing has been answered? – Mike Sep 22 '10 at 15:16
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You can use local NT user accounts if you wish. SharePoint will recognize COMPUTERNAME\USER instead of DOMAIN\ADUSER. Just set the users under the "Users" group.

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Yes - you can run it with forms authentication using the SQL Membership provider. Most of the documentation assumes AD will be there but if you dig around the net there's a number of guides around where people have done it without an AD.

If you're asking about running it using the local Windows accounts on a server then I think that's a no but I'm not certain on this point.

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