Pseudo class :hover does not work in IE7
IE7 won't allow you to apply :hover pseudo-classes to non-anchor elements unless you explicitly specify a doctype. Just add a doctype declaration to your page and it should work perfectly.
<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.01//EN"
"http://www.w3.org/TR/html4/strict.dtd">
More on IE7/quirks mode can be found on this blog post.