I bought a TZ10 a few months ago, the advantage of getting that would be the Power OIS instead of the Mega OIS that the TZ7 uses, it does a very good job in the TZ10. It's not perfect though.
HD movie quality amazed me with it's quality, considering it's a p&s camera I wasn't expecting it to be so good, but you might be expecting the movie quality to be perfect, I don't use it much so I'm not that critical of movie quality.
To answer some of your questions,
A) I watched Gordon's review on youtube of the TZ10 before I bought it, it seems it can maintain focus on subjects when zooming in and out, something that the TZ7 apparently struggled with.
B) There is probably very little difference, I'm not sure there.
C) To have a long zoom in a compact body you need a small sensor, if you are willing to pay more I would recommend Canon's super zoom, the SX1is. Unfortunately you can't have it all in one camera.
Things that are annoying when filming with the TZ10:
There's no manual focus, and sometimes it does really struggle with focusing especially when the lighting is bad
No AE lock,
Zooming is very slow to reduce motor noise