I wouldnt tell her yet but I think you should tell her the truth when you feel the time is right maybe when she is older and can handle it,, she should know. As they have bonded I dont think it matters and he sounds like a great Dad a child is a child you can love them anyway.
Well I also think a DNA test should be preformed, Just in case. If the daughter will eventually be told she has another dad, you don't want any info like this to be wrong.
Anyhow, I think your son should love the daughter just as he has been, Its an emotional blow, to his ego and his marriage, But he needs to somehow, through prayer or counseling forgive his wife. Once the trust and forgiveness is established, for sure the marriage will be scarred, but more importantly it will be "healed". You as a mother-in-law should do your best to not judge your daughter-in-law. She knows she did wrong, your son I'm sure has already ensured that. Your son and his family really need your support, kindness and love, more then anything at this time. You seem like a good lady and I think you should treat the granddaughter as if she's still biologically related to you. Its the love in all your hearts that make you a family, not blood.
First, did they have DNA testing done to find this out, or is it just obvious?? 7 seems young for her to know. Is the child asking questions?? Does she sense something is "wrong"?? I personally would not tell the child at this point in time. If the bfather is out of the picture, leave it at that. Yes, at some point in time she needs to know. Some people think it's better to know at a young age rather than when older.
You and your son both seem like caring people and that it doesn't affect how you feel about the girl. That's great!!
Hopefully someone with an experience like yours will post.