J.W.
I started having talks with my daughters about sex as early as they could talk, since it is a natural part of life. It was always about different little things and different levels.
However, I think that what you are describing goes beyond anything I have heard of other than on discussion boards on children's mental health issues.
Several things come to my mind about what may be termed "hypersexuality" in a 7 year old boy. One is pituitary-adrenal function. I would start with the pediatrician with the possibility of getting him thoroughly tested by an endocrinologist. Another thought is whether he shows any signs of "mania" such as decreased sleep, or what looks like hyperactivity. Another thought is if he could have been too personally exposed to something sexually explicit?
Regardless -- I would definitely have a talk about boundaries and get across that those boundaries with other people cannot be crossed at any time what-so-ever. Even children can be put on the sex-offender registry, before they are old enough to really even understand. It tears families apart, strips the child of normal adolescent development after they get older, and can dog them decades later after they grow up and are married with children of their own. The punishment in our society now for deviation from the norm sexually is horrendous and I would do anything in my power to not let this escalate.