I don't think it could be done. Just in case I looked through my 7.0 books. Administrator's Companion and MCSE SQL Server 7 Administration don't say anything.
"Inside Microsoft SQL Server 7" says on page 154 " If need be, you can start with per-server licensing and later convert to per seat. The conversion is done on the honor system, you don't need to notify Microsoft. It is, however, intended to be one-time, one-way conversion"
I would advise to backup all databases, move backups off the box, stop SQL Server, copy ALL data and Transaction log directories somewhere out including anything supplemental, like if you have external files for DTS packages or custom executables. Re-install SQL Server using same pathes and everything else the same (except for your licensing mode) and apply the same service packs and patches to make it to the same version. Stop SQL Server copy back to the same locations your log and data files and any supplemental files. It may work.
Otherwize, just restore your databases to the new installation.
Is there any showstoppers to upgrade to SQL Server 2000 or 2005? 7.0 is sort of 2 versions behind now.