I absolutely love this little gadget.
It does what it says it does, and does it very well. You just have to know what to expect.
In my testings, the device recorded the sound of saxophone equally well through the internal and external microphone (I used Shure SM58, just because I have it, I would imagine that the quality can only be better if one uses more advanced studio recording equipment). The recording of a full range performance through the internal mics, taken from the middle of the small auditorium, came noticeable dry on the bottom, just as one would expect from a small handheld mics; once again, using a high-end external mic would definitely improve the results.
The recording of the same performance from the mixer's "line out" was absolutely perfect: I use backing tracks and play live over them; the backing tracks sounded identical to the original ones, and our playing and singing over them was captured just as it was going into the system through the stage mics.
To those reviewers who complain about too much handling noise to be picked up by internal microphones: GET REAL. This is what the input level dial is for. Find it and use it, and don't handle it, hold it! In other words, stop scratching the surface with your fingers...
The device has many features, some very useful, like the "single" repeat mode of playback, which brings the gismo to a full stop after each song in a playlist—very convenient for live performance using backing tracks, and many others.
The DR-07 is powered by two AA batteries, which is just great. I am all for being green, but I had so many iPods, Palms, cameras and other gadgets go dead just because of the internal rechargeable battery not holding a charge anymore, that being able to replace a dead battery in seconds is a true virtue for me. Battery life is very good, too. I had it running in recording mode for two hours straight with display backlight on (I love to watch the level indicators :) ) without any noticeable discharge.
The only thing I found annoying is the fact that In/Out loop, when engaged, plays with a little gap, which is tolerable, if you are practicing over the portion of a track, but makes the feature unusable for live performance (it does the same in "repeat one" playback mode, the looping is not seamless).
Overall I am very happy with the DR-07. I wish I had one of those, when I was a kid and used open reel tape recorders to record music...