@Rob66 I've never experienced what you're describing, and I just ran a little experiment on my listing. When I view the listing as a potential guest might, the blocked dates appear blocked (as normal), and if I select the first blocked day as my "check out" date, the booking works fine. Of course, if I try to select the last blocked day as a "check in" date, that won't work. And I wouldn't expect it to.
I wonder, if as Melanie mentioned, you're simply thinking about it wrong. If it helps to picture it correctly, be aware that blocking a date blocks the *night* of the date, not the rest of that day. The way you worded your text make it pretty clear that you're thinking about it wrong. You wrote "if I block the house for the 1st through the 7th, it shows that no one can check out the morning of the 1st, and noone can check in on the afternoon of the 7th"
Again, the fact that the entire start-block day is grayed out doesn't prevent someone from booking the previous night and checking out in the morning (try it yourself). And, if you blocked the 7th (as you say you did), then why would you expect it to be possible for someone to "check in on the afternoon of the 7th"?