Is jboss-5.x compatible with java 7 ? Couldn't find any compatibility matrix of jboss version with java 7 on jboss site.
JBoss EAP 5.1.2+
JBoss EAP 5.1.2 requires a patch to work with Java 7. (Redhat recommends updating to 5.2 instead of the patch)
JBoss EAP 5.2 will work with Java 7. (No patch required)
JBoss AS 5
No. This is going off the basis that JBoss EAP 5.1 (originally based off of JBoss AS 5.1.0 GA) and above did not work on Java 7 right away and required a update to resolve it. You could probably take a crack at trying to do it yourself but I wouldn't recommend it.
JBoss AS 7
From the JBoss AS 7.1 Getting Started Guide:
Requirements
Java SE 6 or later (we recommend that you use the latest update available)
Java SE 7 can be used with JBoss AS 7