Okay, Jodi, this is from a mom who's been involved with TKD for over 17 years and has 3 second degree black belt sons to show for it.
At 7, many kids are very emotional in class. Usually get a medal or trophy at a tournament will make or break the decision to stay. I've seen students ONE STEP AWAY from black belt who have suddenly dropped out.
The gear is for protective purposes. And hopefully the instructor has said that kids will get hurt way more often on the school playground than they will in sparring in TKD. True. It takes a lot to get good at sparring. At 7 years old I sure wouldn't worry about it at all. The instructor doesn't expect, hopefully, a 7 year old to be able to spar well just because at that level they're just learning the basics to it and can't be expected to do it beautifully.
Maybe he's getting teased at school?
My personal thought as to quitting or not is this: right in the middle of white belt and black belt is the ideal time to decide. Why? Because any lower and they haven't been able to find their potential. Any higher and it seems a shame to quit when so much time, training, etc has already been invested. I'm assuming your son is just a yellow belt. That's too low to really know if he's got what it takes. You can find ways to encourage him. Or check out other TKD classes that he seems to find fun in while learning. You can let him know that if he wants to quit, that's okay but not until a couple of more belts in order to see if he himself changes his mind and gets to like it but also for that halfway point. If it's the class he doesn't like, find another. I can recommend the program in South Lyon and Northville. This is my kids' instructor, I've been helping out for several years, I know this stuff, I've seen kids come and go and can tell from the white belt class who will be back or not. Or who SHOULD come back. I've seen some kids start out too young, are disruptive, but stick with it and develop into very good athletes. Let me know if you want any further info. I'm always glad to help.