When compiling this: 

(2-lines program), must be stored as e.g. demo.F, because error does
not show up when stored as demo.f  (lower case extension) since in
that case the preprocessor cc1 is not used!!

        write (*,*) "hello"
        end

 with this command:
   % g77 demo.F -o demo
 this happens:

g77: installation problem, cannot exec `cc1': No such file or directory
   
 with this system:
 <gcc -v output>
Using built-in specs.
Target: i586-suse-linux
Configured with: ../configure --enable-threads=posix --prefix=/usr --with-local-prefix=/usr/local --infodir=/usr/share/info --mandir=/usr/share/man --libdir=/usr/lib --libexecdir=/usr/lib --enable-languages=c,c++,objc,fortran,java,ada --enable-checking=release --with-gxx-include-dir=/usr/include/c++/4.1.0 --enable-ssp --disable-libssp --enable-java-awt=gtk --enable-gtk-cairo --disable-libjava-multilib --with-slibdir=/lib --with-system-zlib --enable-shared --enable-__cxa_atexit --enable-libstdcxx-allocator=new --without-system-libunwind --with-cpu=generic --host=i586-suse-linux
Thread model: posix
gcc version 4.1.0 (SUSE Linux)

   <uname -a output>
Linux ralap 2.6.16.13-4-default #1 Wed May 3 04:53:23 UTC 2006 i686 i686 i386 GNU/Linux


 because of <reason why you think so>.

Look at g77 -v:
---------------
Reading specs from /usr/lib/gcc-lib/i586-suse-linux/3.3.5/specs
Configured with: ../configure --enable-threads=posix --prefix=/usr --with-local-prefix=/usr/local --infodir=/usr/share/info --mandir=/usr/share/man --enable-languages=c,f77 --disable-checking --libdir=/usr/lib --disable-libgcj --with-slibdir=/lib --with-system-zlib --enable-shared --enable-__cxa_atexit i586-suse-linux
Thread model: posix
gcc version 3.3.5 20050117 (prerelease) (SUSE Linux)


The version of g77 (from the compat-g77 package) does not match
the gcc version, it looks V 3.3.5  vs 4.1.0
So dispite cc1 exists in directory /usr/lib/gcc/i586-suse-linux/4.1.0
g77 won't find it.