Looks like the "override atmosphere" option was added in 8 or 9.

I can use HD resolution images without any issue. I have used a 4000*6000 pixel space background before. How much memory do you have? It could also be an issue with Vue 7. Not sure.

You could try to use a different image format to see if this changes the look. Or try to save the image at a reduced resolution and see if that works. There are some HDRI images included in vue (in the bitmaps folder). Try to use one of those and see if it works.

Good Luck

TD