I have received my E7 back from PCM today - 12/11/06.
All is well. The tech said they reprogrammed it using a PCM DC MASTER ANALOG CONTROL UNIT.
He checked ALL wires and connections on the decoder and throught out the loco. He then tested it on DC POWER PACK and NCE DCC SYSTEM with no problems. He said it just needed a factory manual reset.
I test ran the unit along with my other PCM E7 and the two made beautiful music!
PCM had the unit from 11/28 - 12/6. They repaired it on 12/4-6.
I am about to get my first locomotives with factory sound and DCC, which also happens to be my first locomotives from PCM (Southern Pacific PA-PB-PA set), so I really appreciate when feedback like this is posted here. It definately makes me a lot more comfortable with what is a large purchase (at least large for me). I am just hoping they will actually be released next month. The wait is killing me.