Yes, you need to add the term to the HHK file using the Index Designer pod. You open it by expanding the Index pseudo folder found inside the Project Manager pod.
My guess here is that since X5 appeared WAY before IE7, it simply doesn't understand that IE7 remotely exists. Because it isn't recognizing IE7 (which you really can't expect it to) it's shifting automatically into NetScape mode.
If you can't do that just yet your second best option is to manually add the steps to the list. Depending on what other things you are doing, you might factor this into some batch job that does other things. Then it would be somewhat automatic.
Thanks. That's what I suspected, but was trying to avoid!