I could be miles off here because I'm as far from an IIS expert as it's possible to be, but I came across your question since I too am having trouble with IIS7 in integrated mode. One thing I notice is that you're using the httpHandlers section, which sits in system.web. However, I think for integrated mode you need to use the system.webServer section:
Hopefully someone who knows what they're talking about will correct me if I'm wrong.