IE7 Submit Button (image) issue

Nope, nothing to do with it being an image. The issues is with the containing div height. It's coming from a property on line 69 of your ie7.css style sheet. You're declaring a set height for the .ginput_container class which wraps the textarea/paragraph field. Since the height is too small, it's letting the textarea overflow and the button ends up being hidden behind it.

.ginput_container {height:35px;}

If you remove that, It should work fine.

Please note that Gravity Forms default styling has been tested and works fine in IE7. Of course, there could be some issues based on inheritance from the theme styles, but most of the time there is no need to do extra tweaking in IE7 to get things to display properly.