Having spent a considerable amount of time thinking about this situation I have come to the conclusion that the CAA has contradicted itself...
As has been posted JAR officials did not intend this rule to apply to pilots who kept their IR valid under another ICAO licence, i.e. most of us. They intended that the 7 year rule apply to pilots who had not kept current, in other words, needed retraining.
Now we come to the 'wonderful' UK CAA. I can only assume that the requirement to do all of the ground exams for an IR is to retrain and refresh a pilot who has not kept current, vis a vis it contradicts what they are demanding of 'current' pilots, e.g. EK, SQ etc. Therefore it would seem to back up the JAR version of how the rule was intended to be and not to play silly b*ggers with perfectly well qualified pilots.
Interestingly pilots who turn up at some other european JAR offices don't stricly have to keep to any validity rules as long as they can prove that they are current/have an ICAO licence and they get given a revalidated licence for their country when they need it etc...
Makes sense...???