First, spelling is almost always going to lag behind reading skills, sometimes far behind, so let that worry fade.
How is his writing in math? When children struggle with math, at 7yo that can often mean they are having trouble with the written aspect of it. So, if that is not the problem with your ds, if he is forming the numbers well and not seeming to mind the written aspect of it, then I might agree with the OT that it is nothing mechanical except building up muscles (doesn't hurt to get a second opinion).
It could have something to do with writing words themselves. Writing is not the same thing as reading (or even writing numbers, for that matter). You use different parts of the brain. So, it could be the combination of thinking/changing thoughts to words/figuring out how to spell the words you are thinking/remembering that long enough to write down the words because at this age you write so slowly/actually writing the words. This is a huge combination of skills! Then for some kids, there is reluctance to write something that is less than perfect. Many kids are *not happy* with "invented spelling". Writing is huge! And of course, sentences are long long long.....
For now, I would *not* have him write out his thoughts. Keep the mechanics of writing entirely separate from any other emerging skill (unless he is doing it because he thought of it and wants to). That doesn't always mean copying words, it could mean copying patterns. In fact, this is how Waldorf introduces writing: they take certain shapes and incorporate those into images that tell a story. Handwriting per se is not expected to be taught until 2nd grade, which in Waldorf is closer to 8 than 7.
Also, with school kids and schooled-at-home kids, there is the chance that he has an idea his writing is bad (you read that as "behind the curve") but he sees that as "*I am bad* at writing", which can end up being a self-fulfilling prophecy, especially in perfectionists that are not skilled at perseverance.
Finally, there is the chance that he just doesn't care? Unfortunately for him, he needs to get he's writing at least legible, doesn't he?