Well, it seems that no one answered your original question. Let me try.

NO! Do not simply increase the AA#7 load until you get the velocity you want. Every firearm is an individual. Maybe you just have one that is slow.

If you want more velocity, go with a slower powder and load to published data. Since you are using AA#7, they still offer a slower powder in AA#9. H110/W296 or AA#9 would be my first suggestion to get the velocity up. I can guarantee that any of them will get it to acceptable levels.

I have a load with SR4756 that gets 1280fps from a 6" barrel with a 158gr LSWC. It is the wife's load for her M586. In a Marlin 1894 it delivers right at 1600fps.

In the Hodgdon 2008 Annual Reloading Manual, they list a load in 357Mag with the 158gr XTP that runs 1590fps from a 10" barrel. It has been my experience that in a handgun with a cylinder gap that I can expect a 30-70fps difference in velocity per inch of barrel depending on powder used. I will tell you that H110/W296 will deliver considerably more than the 1200fps you are getting now.

Currently, I have two loads for the 158gr XTP. One for the Marlin and one for the M586. The Marlin load is a Brian Pearce load of Lil' Gun and delivers over 2000fps from the 20" barrel. I wouldn't recommend that load for a handgun though because of the trouble that has been noted with Lil' Gun. The handgun load I have already mentioned.

FWIW, use a slower powder. As far as the "big enough" argument goes, shot placement is critical. You have to put it where it counts. A 22LR has killed things too. You just have to put it were it has to go within its range. Bigger and harder and faster just means that a sloppy shot may go more unnoticed!