This probably doesn't take into consideration the fact that the 7D has almost twice as the pixels as the 40D and on identically sized prints, the 7D's noise will almost certainly be completely buried.
Exactly. If a 10MP camera and an 18MP camera have the same amount of pixel-level noise (i.e. in a 100% crop), then the 18MP camera is performing much better; when prints of the same size are made from both cameras, the prints from the 18MP camera will show less noise because you've binned far more pixels and averaged the noise out.
You can't just look at 100% crops of two different cameras and then say "Ah ha! The 40D has less noise than the 7D." Of course it does; it has 8 million fewer pixels! That's the problem we've gotten into with noise; we're not looking at prints anymore, by and large.
The best way to compare noise is to take the 18MP image and the 10MP image and make a JPEG or print of the same size from each (i.e. ignore 100% crops). Only then can you make an accurate comparison.
Attached are two (clickable) images I shot at a recent event here in Toronto (Canadians on the list will recognize the speakers as comedian Rick Mercer and astronaut Julie Payette). They're both shot with a 70-200 f/2.8L on a 1DmkII @ ISO 3200, 1/200s. Is there noise? Sure; especially in the shadows. And to be frank, it does not bother me in the least. And this is with a 6 year old camera with an 8MP sensor! I wouldn't choose this ISO if I could help it, and at 100% you can see quite a bit of pixel-level noise, but these photos are both featured on the client's website. And I wouldn't give up the AF performance of my 1DmkII just for a bit better high ISO performance.
The moral of the story? Pixel-level noise will inevitably increase as pixel density goes up; there's nothing much you can do about that. But I contend that unless you're making very large prints or have very, very picky clients, it's not really a big deal. There are far more important things to concern yourself with when it comes to taking a photograph.