Hi Nigel here's my two-penneth. First off it's a nice image of the Hog. I disagree that the big primes are not practical, they're just bloody heavy and it's a challenge to get the subject centre frame handheld if your frame rate is low. If handheld is not possible, I've seen Belgian and French guys at Duxford (2012/2013) & RIAT (2013) respectively with big 600mm primes mounted on gimble head tripods.
There's no reason to try panning the fast jets as there's nothing to blur. Kick the T/V setting to 1/1000s, 1/1250s for jinkers like the Raptor or Rafale, or more for formation cross overs like the red arrows synchro pair, and enjoy the fact that ISO 100 and F4.5-F7.1 can work at 500mm + (full frame equivalent). You've got no choice if you use Auto-ISO and TV mode anyway.
The real down side of long reach lenses is that heat haze, & water & diesel vapour blur long distance images, but that applies equally to the 400mm/500mm zoom full frame equivalents on cut down sensor bodies like the 7D. In the end long focal lengths allow you to find the aircraft in patches of blue sky in the clag.
On your budget a 2nd hand 100-400mm F4L IS zoom would be a good compromise. 400mm full frame equivalent won't allow you to get a frame filling shot, even at Duxford
, unless it's a Catalina or a Lancaster. Besides the zoom lenses are soft at either end of their zoom range. I own the 100-400 and it struggled on a full frame body at 400mm which was what the minimum
needed for interesting shots of the Spitfires, Hurricanes et al. For bigger subjects at 250-300mm it worked well. On the 7D the 100-400mm is approxiamately 150-600mm.
If you've any doubts, hire. Various company's do 3 days for the price of 1 weekend deals so it'll cost you £100-150 to find out what a prime can do for you at an airshow. Less for the zooms.