I am new to both Node JS and express, and I have just installed npm in Windows 7.
I have installed express using the global flag:
npm install -g expr
I had this problem, Seems though we use -g it's ignored.
I just copied contents of MyProject/source/vendor to C:\Users\username\AppData\Roaming\npm
Copy only needed folders inside node_modules (like: express, express-generator, bower, yo, gulp and packages that should be in PATH).
This problem really bothers everyone (or windows users?), npm programmers should solve it!