Manual Mode T2i with auto ISO

[zim]

Is it correct that this limitation (I also have this issue with the 500D) has been fixed in the 7D through a software update only?

Yes. But given that your camera has already been replaced (three times over now), I would not expect an update for you.    The 7D firmware update seems to be something of a stop gap, since Canon is not yet ready to release a 7DII.

 
A well, still it's got a great little (under-rated I think) sensor