I would be very upset if my child were in that class. Whether or not they want their child to know the truth about Santa is a parent's choice to make. I can understand some parents choosing to tell the truth (such as those who can't afford expensive gifts and don't want their children to feel they were overlooked), but many families want to enjoy the "magic" of this tradition for as long as possible. I believed in Santa until I was about 11, and so did a good number of my friends. I think a lot of kids believe (or want to believe) in this a lot longer than they admit to.
Even if the teachers feels that 7 year olds are too old, many of them probably have younger siblings at home. It creates an awkward situation for the parents when their 7 year old is telling a 4 or 5 year old that the teacher informed them Santa is not real and their parents have been lying.