Isn't it possible that the deployment mode is turned on on your Kentico 7 before the upgrade but for some reason the CMSVirtualFiles folder was deleted? Deployment mode should be turned off prior the upgrade. Otherwise the system is looking for the files on disk and not in the DB.
Another issue could be that upgrade has not been finished completely. Do you see the UPGRADE FINISH event logged in the CMS_EventLog DB table?
In general, every upgrade consists of three steps:
- Replacing files in project folder
- Upgrading a database
- Performing certain C# routines upon first load of the web site.
In your case, it seems that step no. 3 was not performed.
Could you please provide more info about your project? How big in your database? What project type do you use (web site vs web application)? Which .NET Framework version is your site based on? Any customizations? What environment is your web site hosted in?