I am using Visual studio 2005 and Access 2007.
I get the following error
"System.InvalidOperationExceptin: The ITransactionLocal interface is not supported by the 'Microsoft.ACE.OLedb.12.0' provider."
Is this because transactions are not supported by access?
Here is my code.

using (TransactionScope TransacScope = new TransactionScope())
{
//insert and update operations
TransacScope.Complete();
}

Yes. Access doesn't support transactions, you'll have to use one of the SQL Server variants (I'd try the compact edition first as it stores all the data in a single file, just like Access does).

Is there any way I can implement features like rollback using c# as front end and access 2007 as back end.

You would have to handle it all yourself. Which means getting the current data, making the changes and if anything fails, restoring the current data. Depending on how complex your updates are, it wouldn't be too hard.