I am not sure what the procedure was for the iPhone, but for my iPod touch it would not allow me to download the 2.1 firmware until I had downloaded iTunes 8.0. So I am tempted to say no. And plus, there would not be a way for the Genius playlist function to work if it cannot connect to an iTunes version that has it. So even if it would work, you would definitely lose the Genius capabilities on your phone. And what would there be that would prevent you from wanting to upgrade from 7.7 to 8?