I am biased, because I've been playing piano almost as long as I've been feeding myself, but I absolutely think the piano is the best instrument. :) And I don't think I'm being totally unfair...I also play guitar, harmonica, flute, and oboe...I just happen to like the piano best. :)
For one, piano lessons (when done properly) will give the best OVERALL music experience, with everything from theory to reading music to practice to having a trained ear. If you learn the piano, you can often go on to excel at many other instruments at will (which is why I eventually picked up so many other instruments.)
Seven is the perfect age to start piano, because the hands are finally big enough and strong enough to handle it, and the child is still young enough to easily grasp the concepts. I teach piano, and the children who start earlier (4,5) don't tend to really pick it up quickly...it's years of practice, where the 7-12 year old student can pick it up and easily move on to more advanced levels.
Guitar is a wonderful instrument, but it is painful to play at first while calluses form on your fingers and it's not an instrument that comes with easy success...whereas with the piano, your child can be playing a song after his first lesson that he will recognize and enjoy. I am not against guitar lessons, but I think it's an instrument better left to later years.
Wind instruments are really out of the question until lung capacity has grown.
Drums can be started at a very early age and if you're brave enough, that's a good option as well. Again, though, this is why I like piano...it's technically a percussion instrument and you learn everything about rhythm that you would learn with the drums, except you also get beautiful music. :)