IE7 outputs the full URL

When accessing the href DOM property of an A element in IE, it will return the absolute path to the url. The same is true for getAttribute() in IE7 and lower (since getAttribute was broken until IE8).

More info in the first answer of this post: JQuery Not Parsing Properly attr(“href”) in IE

Therefore, the solution would make the following changes to the file "/nodepicker/plugins/nodepicker/nodepicker.js"

  /**
   * Replace links with [nodepicker] tags in content upon detaching editor.
   */
  detach: function(content, settings, instanceId) {
    var $content = $('<div>' + content + '</div>'); // No .outerHTML() in jQuery :(
    $('a.nodepicker-link', $content).each(function(node) {
      var $self = $(this);
      var base = window.location.href.substring(0, window.location.href.lastIndexOf("/") + 1);
      var href = $self.attr("href").replace(base, ""); 
      var inlineTag = '[nodepicker==' + href + '==' + encodeURIComponent($self.attr("title")) + '==' + encodeURIComponent($self.text()) + ']';
      $(this).replaceWith(inlineTag);
    });
    return $content.html();
  }

Also have to make the following changes to the file "/nodepicker/js/nodepicker.js":

  // Add on click function for link select.
  $("a.nodepicker-insert").click(function(){
    $self = $(this);
    var base = window.location.href.substring(0, window.location.href.lastIndexOf("/") + 1);
    var href = $self.attr("href").replace(base, "");
    if(parent.Drupal.settings.basePath.length > 1) {
      href = href.replace(parent.Drupal.settings.basePath, '');
    }
    nodepicker_insert(href, $self.attr("title"));
    return false;
  });