I have 2 sisters and a brother. All of their birthdays are in December, whereas mine's in May. My parents always threw a combined birthday bash for them, and I always got a little gift to "make me feel better".
Truth is, however, that I couldn't have cared less! I just thought it was fun to have a party & eat cake/ice cream.
My mom/dad never got me anything big - usually it was just a new book or a picture/poster for my room. I appreciated the gifts, but like I said, it was no big deal.
Plus, my sibs never got anything in May when it was my birthday?!
I'm a mom of 5 now, and have been lucky enough that their birthdays are all spread out & (so far) there haven't been any issues with jealousy.
But I gotta say that I believe that a 7 (almost 8) year old is plenty experienced enough to understand not getting a gift when his baby sister is having a birthday! Him picking out something special just between him & his sister should help make this a special day for him as well.
Ok - there's my 2 cents worth!