Yes, the corrections that you propose are correct. And yes, you should include an explanation statement with your amended Form 8606 [not 5329 as I originally typed].
Since you are correcting a previously filed Form 8606, mail the corrected 2007 Form 8606 to the same address that to which you would send Form 1040-X. For someone living in NJ that would currently be to Department of the Treasury, Internal Revenue Service, Kansas City, MO 64999-0052.
https://www.irs.gov/pub/irs-prior/f8606--2007.pdf
