[SossMan]

it really depends on the index and margin and the caps (adjustment cap, life cap, floor) of the ARM. Assuming it's standard, though, I would almost always go with the 5 yr ARM in your spot. This is your first house, it won't likely be your last. You said your horizon is 5-7 years...if this is the case, then a 5 year ARM is a no brainer. You are paying soooo much more over the 5 years w/ the 30 yr fixed that it becomes much more burdensome than the small chance that
A) you are still in the house in 5 years
B) rates are significantly higher in 5 years
C) you are not only in this house, but still have this loan in 5 years (rate/term isn't the only reason to refi)
D) you won't have a non-marginal increase in pay 5 years from now
All in all, unless you are set in stone that this is going to be THE house for 10 yrs, get the ARM. If it makes you feel more comfy, get the 7/1...the yield curve is so flat right now that the 7/1 is usually only 1/8 different than the 5/1.

Think about it this way:
You are saving .75% each year. Not counting TVM, that's 3.5% over 5 years that you have saved over that time. In order for a 30 year fixed to have been a better decision, you would have to have a rate on your ARM after the 5 year period long enough to add up to 3.5% difference on the backside. With the caps that are likely in place on your ARM, it would likely take a while to do that. Again, this is discounting the fact that a few hundered dollars a month now is likely worth much more to you now than a few hundered dollars 5-7 years from now (both from an inflation and an income standpoint).

I'll PM you my phone # if you want to discuss. (I'm in real estate finance)