While PS7 is a good application and still used by many, you'll probably find as time goes on that more and more plugins will be developed for the more recent versions and will not work with earlier versions. This is certainly true with brushes - you'll find that many brush sets available here and at other sites will only work in
PS CS or above. Also, new Photoshop books are always geared towards the most recent version.
There are lots of nifty features in the later versions, but it all depends very much on how much you use
PS and what you use it for. I've never been a fan of upgrading just for the sake of it: if you only use the application occasionally you may find that it's not worth it. On the other hand, if you use it heavily or professionally I would say definitely go for CS3.