The upgrade from Stage 5 to Stage 7 will "just" be a change from the application itself. You keep the models you already have but they will be updated to the use the new "engine under the hood".
The K2 and YC5 will simply be updated to use the new engine (and some default presets may change to the new ones).
The D4 will (as I understand it) change to the the new Steinway D package which includes both the New York and Hamburg models (not just one, both). The "old" D4 is gone and essentially the New York and Hamburg Steinway D's are "just" presets of one underlying piano model (not a surprise there).
If you use the free KiViR or Bells instruments you will need to update both of those (it's just a quick download and a drag and drop). The existing versions (in your case for v5) will not work with v7.
You do not, AFAIK, get to choose new instrument packs, but if I understand you correctly your main worry is loosing the Steinway D and you will not lose it, you will gain some extra presets split into New York and Hamburg variants.
I would be surprised if you did not notice an improvement in quality from v5 to v7, but it's hard to be sure how any individual will react to the updated sound models.
The refinements are many and the most significant change from 6.7 to 7.0 has been the new "double polarization" model for strings, which as I understand it models the string vibrations better. If I recall correctly, the change in quality from v5 to v6 was, on it's own, generally considered noticeable (and better). Version 7 is another step up from that. As the Steinway D's became officially authorized by Steinway in version 6 (IIRC) you can rest assured that Steinway at least think they now faithfully represents their top concert grands (and I dare say also have significant input to any changes made). You may find the sounds in the version 7 different from what you are used to in 5, but it will, I feel, very quickly become a welcome change.
Exactly what refinements are made from version to version is never fully known.
I think all you have to do when/if you upgrade is open the licensing dialog and activate it - your code should still work. Your models and the default presets will be updated automatically.
StephenG