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Delphi 2006 loads Delphi 7 projects fine and converts the .dof file into a .bdsproj file. If you have got all the necessary components (either in source code or as Delphi 2006 packages) the project should just compile without any changes. Afterwards the .dof file is unchanged and usually so is the .dpr. Unfortunately that means the build number is also not auto incremented if you load the project into Delphi 7. The .dfm files will get some additional properies if you edit and save them in Delphi 2006. They will also lose any AutoScroll=false property setting since this is the default with Delphi 2006 (true was the Default with Delphi 7). This is unfortunate because it will make your forms look bad on Windows XP when comiled with Delphi 7 again.
This question was asked on the wiki: Delphi.