The Show taskbar notifications setting in Windows 7 Media Center (found under Settings>General>Startup and Window Behavior) toggles the appearance of a little red dot in the taskbar when a program is recording.

It does not refer to hiding the silly balloon notifications that appear even when WMC is running, as I and ths guy mistakenly thought.

The dot is a handy notification when the WMC interface is closed. I’d recommend leaving this setting enabled and also clicking the up arrow next to the task bar, choosing “Customize Taskbar” and selecting “Show icon and notifications” for the Windows Media Center icon so that it is always visible when a show is recording.