Bicycle Mechanics - freewheel vs Cassette interchange

I have 26" wheel, 135mm wide hub with 7 speed freewheel, It has a long derailure and index shifter. I need a new wheel and all new wheels seem to be freeHUB instead of freeWHEEL like my old one. If I buy a new freehub wheel and a 7 speed cassette, will the existing index shifting/derailure work??
Is the spacing between gears the same on freewheel and casstte?
Will the cassete be aligned in same position in the frame as the freewheel was? (Has something to do with wheel dish?)

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Stick to your freewheel. If this wheel won't work for you, these folks have lots to choose from.
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While you are at it, why not go to 8 speed?(I'm one of those who don't consider 9 spd on a mtn.bike an "upgrade"). I would think that since you mentioned replacing the cassette that you are also replacing the chain. So if you are already replacing the wheel, cassette, and hopefully, chain, why not add a shifter to the mix, and maybe a rear der. for a slight bit more, and upgrade to 8 spd. Might even be able to use your existing rear der, so might only need to add a shifter to the mix.

The freehub design is fundamentally better - in a traditional freewheel hub design, the bearings are on the inner side of the freewheel, leaving lots of axle exposed to torque between the bearings and the frame's drive-side dropout. Especially with 7 speeds. This is much less of a problem for lightweight riders, and of course less of a problem for riding on road than off-road - bumpier terrain is more likely to bend axles.

If you need to get a new wheel anyway, then get a wheel with a 7-speed freehub. The cog spacing is the same for 7-speed cassette and 7-speed freewheel (assuming both are shimano-standard compatibility). Wheel dish should be the same.

You could go 8 speed, but that would require changing your shifters as well. Actually, 8- and 9-speed (and 10, for road bikes) cassettes fit on the same freehub, so if you're going to update to a modern 8/9/10 freehub design, you may as well go 9 speeds on a mountain bike.

As Tim noted, the freehub is an inherently superior, stronger design so go for it. A 7-speed freehub wheel may be available but actually 7-speeds are obsolete so you might as well get a wheel with a current 8/9-speed freehub.

You can still get 7-speed cassettes readily and these can be used on an 8/9-speed freehub by adding an inexpensive 4.5 mm spacer you can get mail order or from most LBS's. That would let you continue to use your current shifters. Your current rear derailleur will work with 7,8 or 9-speeds so that isn't a problem no matter what you do.

Thanks for the fast replies.
If I put on an 8 speed cassette, but don't change my shifter (til later on), will it work and shift through 7 gears, and just skip the 8th gear? If so, will it skip the smallest or largest gear?

Thanks for the fast replies.
If I put on an 8 speed cassette, but don't change my shifter (til later on), will it work and shift through 7 gears, and just skip the 8th gear? If so, will it skip the smallest or largest gear?
I believe 7-speed and 8-speed cogs are spaced similarly enought that a 7-speed shifter will work with an 8-speed cassette. You will probably lose access to one cog but you can determine which one by adjusting the derailleur limit stops to block which ever end you choose.

No, 7-speed shifter won't work (at least not well) with an 8-speed cassette. The cogs on 8-speed cassette are slightly closer together than the cogs on 7-speed cassette.

Short answer: if you are willing to change your shifters, then just update to 9-speed with a modern wheel.
If you want to keep your shifters, you can either
a) get a modern wheel with 8/9 speed compatible freehub, and run a 7-speed cassette with spacer
b) find an older MTB wheel with 7-speed freehub, and run a 7-speed cassette.

Option a) will be easier to find the stuff, and allow future upgradability. Option b) will be a slightly stronger wheel (less dish on the rear wheel) but its main strong point is that it's not a workaround.

Shimano 7-speed cogs are 5.0 mm on-center and 8-speeds are 4.8 mm on-center so the difference is rather small and the float in the top pulley of Shimano derailleurs will probably cover it. If you get the derailleur aligned with the center cog, the deviation at either end will be small enough to work. It won't be ideal but useable.

As an example, my son's mid-90's Trek 1220 road bike came with 7-speed RSX brifters and hubs but spaced 130 mm. He recently needed a new rear wheel and got an 8/9/10-speed replacement. He also needed a new cassette and chain. The LBS put on an 8-speed cassette without either of us realizing it. When I saw it, I asked how it shifted and he said it was fine. I don't know which cog isn't accessable but since he lives in FL, I assume he gave up the largest one.

Many THANKS for the great replies!!

No problems switching between cassettes and freewheels. I used to race (road) on a set wheel with a freewheel, and train on a wheel with a cassette. Switched them back and fourth freely without any shifting problems.

I believe 7-speed and 8-speed cogs are spaced similarly enought that a 7-speed shifter will work with an 8-speed.

+1. The reverse works, too. I have friends with old 7-speed road bikes and they use 8-speed brifters just fine.