Mark,
Amazing--I just went through an almost identical experience, down to testing the script in both 8 and 7, and having it work in 8 and not work in 7. I haven't found a solution yet either.
When you open the doc in Reader 7, do you get the two Adobe messages? I first get one that says "Some features may need a higher version of Reader" or words to that effect, and then a second one that says the user *must* upgrade (neither of those messages are mine--they are generated by Adobe).
Makes me wonder if the script doesn't work in 7 because Reader has decided the document is incompatible and disables it somehow. That's just a guess.
This issue probably isn't important enough on this project for me to pursue it any further--but if I were to pursue it further, I would probably try creating a plain-vanilla PDF document without any 8 features and seeing if the script worked when it was opened in Reader 7.
HTH, and please let us know if you find a solution!
Kathryn