Was the 707 the only aircraft with a parallel yaw damper?
To the best of my knowledge, the early DC-8's had one also.
I think what you mean by claiming that "pedal forces would be excessive in the event of an outboard engine failure" is that the parallel yaw damper could prevent pilot obtaining maximum pedal deflection to maintain VMCG or VMCA.
With the early type of parallel yaw damper, that is correct.