It looks like something in SP1 has broken kendoUI icons in IE7. I confirmed with two different VMs. I cannot see icons in IE7 on any widget nor http://demos.kendoui.com/web/styling/icons.html. Using web archive I am able to see the icons in IE7 http://web.archive.org/web/20130128210046/http://demos.kendoui.com/web/styling/icons.html.
I rolled back to v2013.2.716 and the icons display properly in IE7.
I rolled back to v2013.2.716 and the icons display properly in IE7.