Are you sure you’re not doing something wrong? This code works for me on IE7:
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN"
"http://www.w3.org/TR/html4/loose.dtd">
<html>
<head>
<style type="text/css">
code { white-space: pre; }
</style>
</head>
<body>
<code>
function() {
alert('yay');
}
</code>
</body>
</html>