I archive and store RAW files. Why? When I began digital photography in 2001, RAW development software was in its infancy with the Nikon D1,as was my skill in developing raw files. My computer systems and monitors back THEN were nowhere near as powerful,fast,and spacious as they are today. This held true for several years thereafter,and to an extent, is still true today. The more data one has to process, the more possibilities.
As to Garbz's point; regarding storage. I would ask why if as he says, "space is not free but it is cheap, LUDICROUSLY cheap" then why he does not walk the walk he talks and keep his RAW files??? If space is "LUDICROUSLY cheap," as he puts it, then why be content with keeping a mere 8-bit JPEG image when he could be archiving 12-bit or 14-bit (real data) raw files? Seems a bit of a disconnect. Having been at this myself since the early days of d-slr photograhy, I have seen a few absolutely MAJOR advancements in image processing software, such as the invention of D-Lighting AKA FIll-Light optimization in software, Highlight Recovery software, the Adobe Camera RAW software application, the Lightroom speed advantage landmark, and the quick-masking technologies developed by Nik Software and first used in Nikon Capture with the Control Point Technology, and now sold as Viveza; this is a technology the folks at Adobe have tried to imitate, but can not yet equal, especially in terms of ease and speed of use.
Again, if storage space is "LUDICROUSLY cheap," I would think a fellow who can afford $100 terabyte drives galore ought to see the value of saving 12- or 14-bit data, unless of course he has not been involved in digital imaging long enough to have seen how crude software and computers were nine or ten years ago, and who doesn't have first hand experience of how the sudden development of tremendously better software can breathe entirely new life into archives of older, 12-bit RAW images shot just seven or eight years ago. With 8-bit JPEGS, the majority of the information is thrown out. RAW files are your digital negatives! Keeping JPEGs only is tantamount to keeping only 4x6 color prints, but throwing away the negatives, due to lack of space to store said negatives. I mean, we have ludicrously cheap storage,right? Why not keep the negatives,and make new prints as needed?
But back to the original question about the 7D and medium and small raw files: opinions seem divided,and one observation I have seen is that from those who own both the 5D Mark II and the new 7D--the 5D-II does a better job on its reduced-size RAW captures than the 7D does on its reduced-size captures. On average, a rough generalization is that reducing in size by half reduces noise by a factor of about 1.4. But the problem really is that, at a per-pixel level, the 7D is significantly higher-noise than the 5D-II is. I understand that musicaleCA owns a couple of 7D cameras, but does not have experiecne with full-frame cameras,and he might be blinded by his new love, the 7D. But from what I have been able to glean from Fred Miranda's many dual-camera owners, the remarkable performance of the 5D-II's reduced size RAW captures is *not* carrying over to the 7D's reduced captures,especially those shot at higher ISO settings.
Applying a boatload of noise reduction to a 329 square millimeter 7D capture of just under 18MP is one thing: applying NO noise reduction to an 864 square millimeter, full-frame capture from a 12.8 MP EOS 5D or a 21.5 MP EOS 5D-II or a 24.5 MP Nikon D3x capture is an entirely different thing. We're talking about a very complex interaction between pixel size and well capacity, sensor dynamic range, lens performance, and native, straight out of camera per-pixel image quality. One thing I know: a powerful PC with ample RAM and modern,sophisticated software, with 12- or 14-bit RAW data can make a very fine image file; probably better than one the camera's on-board processor can make in 1/10th of a second at shooting time.
Based on the increase in computer and software power and capabilities over the last 5 years, my money goes to shooting RAW and KEEPING RAW data on-hand for later processing. And, this is the part that irks many APS-C advocates, I think the lens/pixel density equation has already been maxed out with current lenses with the 7D. 17.6 million tiny pixels, in my opinion, are no match for even 12.3 or 12.8 million more-than double-sized pixels. The per-pixel noise level is better with the full-frame camera, and the color response seems richer at higher ISO's with the full-frame large-pixel cameras, and the performance of average- to mid-level professional lenses like the 17-55 f/2.8 IS Canon zoom seems to have been maxed out with the 17.6 million pixels crammed onto the 1.6x sensor size.
So, to briefly re-state what I have been able to glean: 5D-II reduced size raw files seem to do well,even at higher ISO settings. But the 7D, which has the smallest pixels of any d-slr ever made, on a small sensor, which is extremely demanding of lens performance, is creating reduced size raw files that 5D Mark II owners are not thrilled with. For whatever reasons--those who are comparing a FF, higher-MP count camera from Canon with the new 1.6x camera are giving the edge not to the newer technology,but the old-school, big-block,large-displacement,normally-aspirated V8 "ride" over the newer "ride" and its small-displacement,higher-revving, fuel-injected 4-banger DOHC, 4-valves-per cylinder technology...