This is from personal experience last april with a 2007 macbook pro.
Apples policy is to always replace with the latest generation. I received my new i5 replacement for a 2007 macbook pro, and i called 3 days after the newest models were released.
To receive a replacement. You need to have 3 major hardware failures. (harddrive, superdrive, logic board). You must then request a replacement. On the Fourth major hardware failure apple will replace the computer if you have requested them to do so. You should have a case id number written down from when you requested a replacement computer.
Apple will match your old computer with the new computer speck for speck. HOWEVER, you need to know what you should be getting when you call, because often the customer service rep may not know the correct procedure.
Example:
2007 macbook pro 15 in
2.2 ghz, with matte screen.
(glossy was a $50 upgrade with this model, but i didn't have it)
dual link dvi
expresscard
The new 15 in i5, doesn't have any of these features. Apple is required to match the specs/features of the past computer if possible. therefore
I was offered an upgrade to a 17 inch macbook pro for free, because the 2010 15 inch doesn't have one. (I had to ask for this, and was offered the option)
I requested the hires matte screen upgrade because my original computer was matte. this was given for free by apple
I also got a free dual link dvi adapter from apple since the new macbook pros don't have it and the old ones did. (had to ask for this as well)
Apple will also send you a check for the remaining balance of your applecare, They will also let you buy additional upgrades if you pay the upgrade cost yourself
Hope that helps