I keep trying to use the sleep spell in MM2 but it wont even let me choose the number 7, what am i doing wrong?

Is it in your spell book?
You probably need to learn it from the Magic Guild first.

You have to pick the spell level first. So the command would be C 1 7, as three separate key presses (that's for Cast, Spell Level 1, Spell number 7). Then the game will prompt you to pick your target(s).

EDIT: Or, as PetrusOctavianus suggests, you might not know the spell yet. In MM2, you don't learn every spell on leveling up, some have to be purchased or found elsewhere.