Just installed chdk (1.1.0-2968) on a Canon G7 (1.00i) and using R384-win32 on XP
The issue waterwingz was having had to do with other software accessing the camera on connect, putting it in a state that makes mode switching not work.
This can happen on windows, especially if you are using the "filter" driver. I would highly recommend using the INF driver if you aren't already. Note that this will normally disable regular PTP access to the camera. You can remove the driver if you want to restore the original behavior.
Does the camera screen go black when you plug it in? This is usually an indication that some other program tried to access it.
Also to be clear, the camera should be in PLAY mode when you plug it in, and when you want to switch mode, you should use the "rec" command in chdkptp. If you try to switch using the physical controls on the camera, it probably won't work.
I don't recall anyone reporting using the G7 with PTP before, so another possibility is that mode switching over PTP just doesn't work on this camera.
AFAIK the G7 does support Canon's remote capture API, so you may be able to accomplish whatever you are trying to do with other software.