This error means somehow the data conversion from version 6 to version 7 did not go to plan. You can simply continue using version 7 without the old data.
Alternatively, if you'd like us to investigate this issue, please compress the contents of C:\ProgramData\SoftPerfect\NetWorx to a ZIP file and upload it here.
Some really old NetWorx databases were creating using UTF-16 text encoding, while the newer ones use UTF-8 for compactness. The current conversion routine can't handle two databases in different encodings, but we will get this fixed shortly. Your data will be saved (except for the per-application usage breakdown).
Not all data are imported. In particular, when converting usage records, it will not convert per-application usage breakdown. Usually this information takes most of the space, that's why the size became much smaller.
If you enabled application tracking in the welcome dialog of version 7, it will be recorded from then on.