You are right. The directions say to make HST's out of two 8 1/2" squares, cut in half diagonally (which would give you two blocks app. 7 3/4" square). You could then trim them down to 7 1/2" (which would yield 2 FINISHED 7" squares)
So maybe the writer got confused between the size of unfinished and finished squares. Just add the extra 1/2 " to the ones that are supposed to be cut 7" square. it should all work out then.