Morning and Welcome to the Forum!!!!
I upgraded from the K20 three years ago, which had the same sensor as your K7. The K5 sensor is head and shoulders above the 14MP sensor. Pentax really has acquired a tremendous understanding of the 16MP Sony sensor - and has produced a lot of models with it.
The K5II as discontinued some time ago, however - I believe that the demand from the outset for the K5IIs surprised them. So, that is probably the main reason for the early demise of the K5II and the continuance of the K5IIs. Pentax models have the tendency of (price wise) coming out somewhat high, then dropping over time. At the point that they are discontinued, they drop in price - inventory reduction, and then their price tends to rise through the off market dealers, who hold a few new bodies, for folks that want just that model for what ever reason.
There are a lot of posts on the difference between the K5II and K5IIs - the lack of the AA filter. The difference - and especially considering price, between the K5IIs and the K3 is currently being debated. I am considering possibly upgrading to the K5IIs this next weekend (Black Friday/Cyber Monday), since I am thinking that may be the low point in pricing. I still have not make up my mind. The K3's price will probably continue to drop a bit for the sales, bounce back up to normal and then drop over time until it is replaced (who knows when).
Upgrading to either the K5IIs or K3 will be vastly superior to the K7. That I know from experience. Which would be best for you, all depends on how and what you shoot. A bit more information would help. If you have the funds, you can't go wrong on the K3. On the other hand - for the price the K5IIs is a tremendous value. How long you feel that it will continue to be - again depends on the type of images you take - and what may be coming out next. Also, how long you plan on keeping the new body. Your lenses will also help you make the decision. The K3 benefits greatly from the better glass. The K5 will also, but tolerates less perfect quality glass better.