Like other browsers, Opera Web Browser supports many standard MIME types and also a few Opera-specific MIME types. Of the Opera-specific types, the implementation of the various browser skin and browser configuration MIME types(listed below) has a design flaw that allows the remote dropping of an arbitrary file with an arbitrary name and type in a known location. This is triggered when the victim accesses a URL.
Exploitation becomes easier when this vulnerability is combined with the other "Directory Traversal" vulnerability described in the attached advisory.
II VERSIONS AFFECTED:
All versions upto and including 7.21 that support the flawed MIME types are vulnerable. Version 7.22 contains the fix.
By using this flaw, an attacker may:
i. Drop arbitrary files with arbitrary names on a victim's hard disk. ii. Run scripts with higher privileges. iii. Read the contents of the directories on a victim's hard disk. iv. Read any file. v. Read M2 emails (Built-in Opera mail client).
IV. TECHNICAL DETAILS:
We will consider the "application/x-opera-skin" MIME type first for the sake of clarity. The issues are the same for the other five flawed MIME types. Their specifics are mentioned in a later section below.
According to the functionality that Opera provides, a user can install a new skin just by clicking on a link. Opera automatically downloads and applies the skin without confirmation from the user. For this to work, the MIME type of the skin file has to be set to "application/x-opera-skin" on the web server. The file type of an Opera skin file is "*.zip". The Opera skin file specification  says-
"An Opera 7 skin file is a zipped file with extension .zip that contains a "skin.ini" file at root level and a bunch of images making up the skin. The "skin.ini" file contains the whole skin specification. All other files in the zip file are pointed to by the specification in "skin.ini"." 
Skins files are downloaded to "C:\Program Files\Opera7\profile\Skin\<filename.ext>" (if the install directory is "C:\Program Files\Opera7\". It is not necessary for a remote attacker to know the install path of Opera for exploitation.)
Skin files that do not have ".zip" extensions but are valid skin files are automatically downloaded and applied by Opera if the correct MIME is set on the httpd. They are downloaded to the default skin file folder. However, these skins are not shown in the "file>preferences>skin" menu. Only skins with ".zip" ext., are shown in the list.
The security problem here is that even invalid, corrupt skin files with any extension (including exe,com, et al) are downloaded to the default skin file location. The victim doesn't necessarily have to know that he is downloading a skin. He just clicks a malicious link and he is given a harmless looking dialog box prompt saying that the skin file is incompatible with the current version of Opera after the file is downloaded. User may click "OK" or "CANCEL" but it has no effect on the download behaviour. The file is still present in the skin file folder and it is not deleted.
This means that an attacker can comfortably drop an arbitrary file with an arbitrary name & type on a victims hard disk in a known location by making him access a simple, not-specially crafted URL. Using an exploitation method detailed elsewhere, the arbitrary file can be executed.
For instance, if a victim clicks on a link http://foo.com/foobar.exe where the MIME type of foobar.exe is set as "application/x-opera-skin", foobar.exe is downloaded automatically to the skin file folder. The name foobar.exe is preserved. So, for a default install of Opera, the file is dropped in and as "C:\Program Files\Opera7\profile\Skin\foobar.exe".
Other than the folder location where the file will be dropped and the file type associated with the MIME type, all the details are the same as the skin MIME detailed above for the MIME types listed below. The file type associated with a MIME type does not hinder the dropping of files of other types as shown above. It is just presented here as useful information.
For all the MIME types below, the locations for a default install are given. However, a default install is not necessary for exploitation.
i."application/x-opera-skin" - Detailed above
ii."application/x-opera-configuration-skin" - File is dropped in C:\Program Files\Opera7\profile\skin.
iii."application/x-opera-configuration-keyboard" - File is dropped in C:\Program Files\Opera7\profile\keyboard. The file type associated is "*.ini".
iv."application/x-opera-configuration-mouse" - File is dropped in C:\Program Files\Opera7\profile\mouse. The file type associated is "*.ini".
v."application/x-opera-configuration-menu" - File is dropped in C:\Program Files\Opera7\profile\menu. The file type associated is "*.ini".
vi."application/x-opera-configuration-toolbar - File is dropped in C:\Program Files\Opera7\profile\toolbar. The file type associated is "*.ini".
About these MIME types, Opera's documentation says-
"If the server returns content-type "application/x-opera-configuration-menu" or "application/x-opera-configuration-keyboard" or "application/x-opera-configuration-mouse" and the file has the "ini" extension, Opera will download and install the menu, keyboard or mouse gestures setup directly" 
IV EXPLOITATION SCENARIOS & EXPLOIT:
According to my investigation, files can only be dropped in the default folders mentioned above. Using directory traversal techniques to drop the file in other locations does not seem to be feasible.
Although any file can be dropped on a victim's computer, the highest compromise that can be accomplished seems to be the running of scripts with higher privileges. Files other than the file types handled by Opera cannot be executed. This means file types like exe, bat, etc.., cannot be executed although they may be dropped and file types like html, txt, gif, etc., can be executed. Nevertheless, the executable files dropped using this vulnerability can be executed by using other vulnerabilities(possibly in other software).
This flaw can be exploited alone but, if Opera is not installed in the default path, a 'blind' exploit will not work. Nevertheless, when this flaw is combined with the Directory Traversal vulnerability (detailed in the advisory "Opera Web Browser Directory Traversal in Internal URI Protocol" published by me, attached to this one), 'blind' exploitation, i.e., exploitation without knowledge of the install path becomes possible.
A proof of concept exploit is attached with this advisory.
V. VENDOR RESPONSE & SOLUTION:
The vendor, Opera Software, deserves special mention here. I had previously read about Opera Soft's promptness in resolving security vulnerabilities in their products. My experience with them is one of the best I ever had with any vendor. I hope they continue to maintain their good record even with future security issues.
An updated version with a fix (7.22) is available from the site - http://www.opera.com/download/
This advisory is meant only for the dissemination of information, alerting the general public about a security issue. Use this information at your own discretion.
In brief, the author is not responsible for any use, misuse, abuse of this information. Also, this information is provided "as is" without any warranty of any kind.