I picked up this old recycled bianchi frame that has a 7 cog gearset with a shimano 600 derailler (double front). I really like the minimal setup but I have a feeling that I need to replace the rear derailler, because it vibrates badly and doesn't line up (puts odd angle on the chain, even with a trued hanger). But I'm not sure if this is due to wear/damage to the derailler, or just incompatibility of the components (recycled, after all). I'm hoping someone here can resolve that question for me? Is this derailler compatible or is there a better choice?

What shifters ya trying to use with it and are they index or friction? Even if everything is compatible and the cassette or freelwhhel is ok, there could be derailer adjustment issues. Totally too many possibilities here with an old possibly cobbed POC. Another issue is that the chain may be too long.From that picture, it looks like it might be rubbing the cage and it isn't even on the small cog.

Friction downtube shifters, no rubbing on the cage. The vibration is due to the chain hitting the pulleys at non-optimal angles, so far as I can guess. Maybe I just need to go at the hanger some more. But I'm considering throwing some newer parts on it, and I was wondering if anyone had suggestions.

Basically any derailleur will work. Derailleurs only do what the shifters tell them to do.

As long as it's friction, and the deralier still has to be able to shift the big cog and wrap enough chain.

A friction derailleur? Those don't exist.
The chain wrap and cage size are important factors as well. That's why I said
"basically".

My reference was with respect to friction shifters which he has. And well, yes indeed friction derailers do exist.What do you think was used before index shifting(but you can use an 'index' derailer in a friction system).Try using a non index derailer in an index system. You might get lucky and get one to work in some combinations, but don't count on it....A RD has to have a throw ratio compatible with the pull of the index shifter.

So at the bike shop today I was told that this was a six-speed derailler. Oh and also it turns out my hanger was still messed up. hahaha. Anyway I have an eight-speed hub so I am going to take out the dang spacer and put in a 8x12/25, with maybe a used eight-speed derailler (staying with friction though). Of course this will do little to diminish the new-bike-lust...

There is no such thing as a real 6 speed RD. What you have may well work with 8. All it needs is enough range between the limit screws.

Thanks sydney, I will keep that in mind.

Make sure to replace the chain along with the new cogset, and make sure to check for proper chain length. The chain in your original post looks too long to me.