Yeah, it can sure seem to be a bit of a lashup but all I an say is that it works. To sum it up - the OTG cable connects the N7 to the Y-cable. The rest of the Y-cable is connected to the external battery power source and to the hard drive. The hard drive is then accessed on the N7 using the Nexus Media Importer app (a rooted device gives more options). And note that the external power supply is not also charging the N7 battery - it is only providing power to the drive. One other thing - sometimes there is sensitivity to what is attached when - i.e., connect all of the external pieces together first and then plug the OTG cable into the N7 - I have see it sometimes occur that if I attach the OTG cable to the N7 first, followed by attaching the rest to the OTG cable that Nexus Media Importer does not connect to the drive.
Needless to say, a flash drive is much easier in that it just plugs in with the OTG cable and does not require additional power.
I just purchased the micro USB host otg with micro USB power the one I put in the link from amazon. Reason being i didnt want to purchase two cables.Another amazon member commented to me that it does work powering an external hard drive but it doesn't charge the tablet simultaneously. The person commented that I can use a custom kernel after root to charge and power USB device but hr mentioned the cable as a y cable so I was confused if he was taking about the cable I purchased or a y cabled that was posted earlier by sparksd.