There are many S7s around with the original rear suspension as yours, and I guess some have got through the IVA like it. I f you look on Dave Andrews site, http://www.dvandrews.co.uk/ there is a drawing of a bracket to take a Capri rear shocker instead of the longer Sierra, this will fit to the tub in the area of the red angle reinforcement you have. Some cars have coil overs fitted in this position, I had doubts about the strength of the mounting on the swing arm as it was only designed to take a shock absorber not to support the weight of the car, but I've not heard of any problems. To find a longer softer spring could be tricky as I'm not sure if anyone knows what the originals were rated at, I guess they varied a bit according to the model.