My first post on here since it going live. Possibly my last too. Don't like it!
Anyway, the IQ of the 7D is far better than the 50D. Better than the Nikon D300 too. Or at least the ones I have seen upto ISO6400 anyway.
Examples that can be compared side by side are
http://www.imaging-resource.com/IMCOMP/COMPS01.HTM
But to answer the OP - no I don't think it replaces the xxD line, but more compliments it as a semi-pro sports/general use camera