A. Yes it does, but db-lib is functionally stabilised at the 6.5 level. Therefore if a db-lib client on whatever platform worked against a 6.5 database it should work against the same database migrated to SQL 7.0.
None of the SQL 7.0 features like unicode, character columns greater than 255 characters etc. are in db-lib though. So if you utilise any SQL 7.0 features then these can only be accessed by ODBC 3.7 or OLE-DB clients.
Similarly for 16-bit clients. These are supported, but only with the 6.5 levels of ODBC/db-lib code. 16-bit clients cannot access new SQL 7.0 features either.
The 16-bit client code is not supplied with 7.0 - you will have to get it from the 6.5 cd. This includes DOS drivers.