I must be obtuse, I cannot find the new opitimization levels in C51 v7.0. Here are my Help->About stats:
uVision = 2.30 C51 = 7.00 A51 = 7.00a BL51 = 5.00 LIB51 = 4.23 OH51 = 2.6 S8051 = 2.30 DP51 = 2.30
In the uVision2 IDE, follow this menu path: "Project" -> "Select Device for Target 'xx ' " There you will find a checkbox: "Use Extended Linker (LX51) and AX51 instead of BL51". check on this box. Now when you go to "Project" -> "Options for target 'xx' you should be able to see LX51 locate and LX51 Misc.