From what I've been reading around here, you want to avoid completely draining your N7. With that said, when the N7 is charging (when off), you should see a battery symbol in the middle of the screen with a blinking gauge. I unplug it when the battery icon is fully white. When on, the battery icon on the upper right corner should have a "lightning" symbol inside the battery icon.
I don't think it's charging properly if it's backlit. You may have to send it back to get the battery replaced, but hopefully someone else may have better insight.