I can't answer your question about IE7 under Windows 7, although it does seem odd. Is it conceivable the client is mistaken?
As for your question: "would anyone code for IE7 now?" ... clearly nobody is coding specifically for IE7, but that doesn't mean that it's OK for your site to fail under IE7. For better or worse, IE7 and below still have about 0.75 percent of the desktop browser market (source), and while that might sound negligible, it still represents hundreds of thousands of users.
The solution, of course, is graceful degradation. By all means, implement features that the old browsers don't support, but make sure the site still works (at least in a limited way) in those older versions.