Actually, I don't remember how this really worked in System 7. :-(
I think, at least in Word you could Cmd + Tab (or pressing "." on the numeric keypad) to transfer focus to the menu bar. (Then simply navigate by cursor keys and use Enter or Space to select an item.)
However, Mouse Keys may be generally of help. I think, in System 7, they are part of the "Easy Access" system extension (be sure to have this in your system folder). Mouse Keys are activated by Cmd + Opt + Clear and allow you to navigate by the numeric keypad. (Up, down, left, right, diagonally, 5 is equivalent to a click, 0 to holding the mouse button pressed, the decimal point [dot] to releasing it.) On a PowerBook, you probably have to use the function key as well. (Using Mouse Keys, you may activate a menu by the 0 key. Normally, once the menu bar has focus, you can navigate by cursor keys and select a menu item by the space bar.)
I think, at least in Word you could Cmd + Tab (or pressing "." on the numeric keypad) to transfer focus to the menu bar. (Then simply navigate by cursor keys and use Enter or Space to select an item.)
However, Mouse Keys may be generally of help. I think, in System 7, they are part of the "Easy Access" system extension (be sure to have this in your system folder). Mouse Keys are activated by Cmd + Opt + Clear and allow you to navigate by the numeric keypad. (Up, down, left, right, diagonally, 5 is equivalent to a click, 0 to holding the mouse button pressed, the decimal point [dot] to releasing it.) On a PowerBook, you probably have to use the function key as well. (Using Mouse Keys, you may activate a menu by the 0 key. Normally, once the menu bar has focus, you can navigate by cursor keys and select a menu item by the space bar.)