Your swf file is probably from a newer version of Flash that is using compression that wasn't available with AE 7 was around. I'd look for something to transcode the swf to a movie file.
Does anyone know the solution to this error or how I can import SWF files into After Effects?
Probably not at all. AE 7 used the old Quicktime Flash component which was later abandoned by Apple. Find a way to convert it elsewhere or use a screen capture software to record it while it's running in your browser.
It is as Rick and Mylenium suggest. The SWF import in After Effects got a lot better in After Effects CS3, after Adobe and Macromedia merged. Versions of After Effects before that can't import most current SWF files.
You could transcode the SWF file using a current version of After Effects, even if you just download the trial version for this purpose.