Now, my second suggestion is for you to get SQL Server 2000, and install it on a machine as a NAMED INSTANCE. This is a nice new feature. You can install up to 16 running instances of SQL Server on one machine! Now sure, the machine needs enough drive space, processor power and RAM to handle this, but it is still cool! Each named instance is a fully separate running version of SQL Server. You can set up named instances, and point ODBC connections to the different instances individually. Each named instance is somewhat more than a "virtual SQL Server" but not quite a fully separate SQL Server on another machine. It is a really helpful addition to SQL Server.
You can run a named instance of SQL Server 2000 on a machine that is currently running SQL Server 7.0 AT THE SAME TIME. So, I suggest install the named instance on the box that is currently running SQL Server 7.0 (again, providing the machine has enough resources to handle this). You can then set up Replication between the two SQLServers to replicate your database(s) from the SQL7 install to the SQL2K install.
At that point, you can start testing your application against the databases in the named instance. You can see if there are problems, resource bottlenecks, etc.
RunSQL Profiler against the named instance when you are testing your application, to get a real good look at what is happening.
But first, get SQL books online and start looking stuff up!
hope this helps