I don't know the specifics of PSP 7 in particular, as it's REALLY old, but here are some answers that are generic to all raster editors:
From: Dallas Hallstrom
I cant seem to be able to center the letters correctly and put them where i want.
Any text you enter will be on a layer. You can use the manipulator tool to move the layer around the canvas, just as with any other image element.
From: Dallas Hallstrom
I can't seem to find any pretty text to use. The only text i see is the default text letters (Ie. ariel, times new roman etc)
In every program on your computer, including PSP, you'll only ever be able to use the fonts that are actually installed on your machine. Just because you've got a program that's capable of doing neat things with text doesn't mean you get to use fonts you don't have. Whatever you've got in your Windows\Fonts folder will be what's available in all your programs. If you don't like the fonts you have, get more.
From: Dallas Hallstrom
Each line I start after hitting return, I have to click spaces to try and align it with the rest of the completed lines. The text doesn't automatically align like in "Word Perfect."
I'm not sure how PSP 7's type tool worked, but there should be some justification settings in it somewhere. Try looking up "justify" in Help.
From: Dallas Hallstrom
I cant seem to change the spacing between the lines on the image.
Again, I don't know exactly where, but I'm sure it's got some paragraph settings. Try looking up "paragraph" in Help.
If it really comes down to it, you could always just put every line of text on its own layer, and then manually move each one into place. You shouldn't have to do that, but it's an option if all else fails.
From: Dallas Hallstrom
But the biggest problem for me is I cant seem to be able to go back and edit the text on an image after clicking "ok" because when i do, the old letters do not disappear on the image and another set of letters are stamped right on top. All I am left to do to try and correct it is start all over.
Sounds like you're creating a new text layer rather than editing the existing one. As long as you haven't rasterized the text, it should remain editable. The problem most likely is in the way you're trying to select it. Again, I'd suggest consulting the Help files to learn how to do it properly. Try looking up "select text".
If PSP 7 behaves anything like Photoshop and later versions of PSP, the appearance of the cursor should change when you're in position to select text. Clicking and dragging at that point will cause you to highlight existing text for editing, just like in a word processor.
If it behaves more like Acrobat, there my be a dedicated "select text" tool that is different from the "create text" tool you've been using.
I hope this has been somewhat helpful. As I said, I've never actually used PSP 7. The first version of PSP I ever used was 9, and that was just so I'd know enough about it to write some tutorials for it on this forum. I'm primarily a Photoshop user. Maybe someone more up on their PSP history will be able to chime in.
Best advice though, invest in an up to date program. What you're using is 7 years old! PSP is currently at version 11, so you know.