And it usually is. If I'm able to use it while it's charging, I do.
In general, I'd avoid that, though the difference is pretty negligible. The problem in using the device (especially for processor-intensive activities or constant-screen-on activities) is going to be heat. But keeping the battery above 40% is not a bad practice. Anything that avoids all but a rare below-20% discharge is going to be good practice overall, so I'm picking nits - the chances of heat-related damage are actually pretty low.
But they are also the riskiest bits of heat-related damage, because if a Lithium battery overheats you're basically talking about a lap full of thermite. It'll take your mind off battery longevity, though. (grin)
I have always heard (be a phone, tablet, computer whatever) that you should always let the battery go to less than 20% before you charge it......so what's the correct answer?
The correct answer is that ideal battery longevity is generally found if you keep your battery between 20% and 80%. The advocacy of a deep-discharge is to counter the "memory effect".
Lithium batteries are not susceptible to that effect, and I guarantee you your shiny new Nexus 7 ain't sporting a NiCad battery!
The "full discharge" advice is hopelessly obsolete, but it keeps getting perpetuated.
It's not a BAD idea to bring the batteries down to "device powering off" once in a while - like once every couple of months. But it's not especially helpful either.
Bringing it down to low battery levels repeatedly and intentionally isn't terribly harmful because the actual charge remaining in the battery is at a very safe-from-harm level even when the Nexus 7 tucks itself in for beddy-bye. But there's no actual reason to inconvenience yourself by doing it.
Seriously, though, at the end of the day we're all picking nits. Battery technology has come a long way. Lithium batteries are very capable of absorbing a lot of abuse and still going strong, and those places where they are weak (like their tendency to explode when truly abused) are generally covered with multiple layers of both software and hardware protection systems.
Relax, enjoy your Nexus, plug it in when there's power nearby, unplug it when it's convenient to use that way.