SQl 7 is declared as end of life and end of support and hence not supported with Baclkup exec as well. I don't think there is a workaround to back it up using BE 2010. You may try using older version of BE.
As an aside, it is possible to use the BE12.5 agent on the SQL7 server, however this generates an exception and is not something that could be trusted. We will use the SQL server backup utility and then use BE to backup these files. Thanks for all your help.