Two things to consider :
- Check the dropout width
. With 7-speed bikes, it used to be 126 mm, then it increased to 130 mm (for MTBs and hybrids only, I think). Then, from the measurement you get and from the material of the frame, you can decide what to do.
1. If it is a steel frame, then it's easy to spread the frame to 135-mm and get a new wheel with a 9-speed MTB-type hub such as LX or XT.
2. If it is an aluminium frame, don't spread it! Then get a new wheel of the proper width. Two years ago, I had no problems finding locally a 126-mm wheel with a 7-speed freehub, so it still can be done. If you have 130-mm spacing, then you can go with a "road" hub with a 9-speed freehub.
- Number of speeds and drivetrain
. A lot depends on the age of the bike and components.
1. If your system isn't indexed (i.e. no clicks between gears), then don't worry, be happy. Your derailleur and shifters will work irrespective of the number of speeds.
2. If your rear derailleur is a Shimano indexed derailleur, then as far as I know, it will be compatible with any new shifting requirement, whether you go to 7, 8, 9 or 10 speeds. If it's a pre-1985 derailleur, then it might
work in indexed mode. Basically, it's the shifters, not the derailleurs that decide how many gears you shift.
3. As said above, you can install a 7-speed cassette on a new 8/9 speed hub. Just add 1-2 spacers. If you cannot find them locally (I can't, except in my own spare-parts box), you could also install an 8-speed cassette on an 8/9 speed freehub.Decide which gear (lower or upper) you don't want to use, set the limit screws and adjust the shifters accordingly. Then your existing 7-speed shifters will shift – indexed – through the 7 gears you have selected.
A lot of explanations may be found at http://sheldonbrown.com/k7.html