It probably is underrated in some aspects... But most fans thought it was horrible... and unredeeming... It just wasn't as successful as KQ6.
Don't get me wrong, I play it occasionaly and find enjoyment out of it. But its not one I go out of playing often. Because I have many reasons why I don't like it. I don't really find it all that fun.
This review hits on many of reasons why I find the game one of the weakest entries into the series;
http://www.justadventure.com/reviews/KQ7/KQ7.shtm
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But KQ7 is a very pure game; Roberta's influence on the game wasn't sullied by any suits or outside influences and the game to me is a masterpiece.
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Yet, she may not have even wrote the story... Some interviews, and articles claim that Roberta was busy working on Phantasmagoria and left Lorelei Shannon to design the game in her place. The credits even say the game is "based on Roberta William's King's Quest", what is that supposed to mean?.
So is it really 'pure' Roberta game?
KQ4 and KQ5 are closer to pure Roberta games, and the puzzle types, the use of classic fairy tales, etc, shows.
Nah, I'd call KQ5 truly underrated.
I'd say that most critics hit the nail on the head with KQ7... they had valid criticisms.
Hmm, come to think of it, the game has quite a few few mythological references, some references to Shakespeare (possibly), and references to urban myths (Jackalope). But how many things in KQ7 even have to do with classical fairy tales (i.e. a direct reference)? I can't think of any off the top of my head... Not like I could with the previous games in the series...