You cannot install SQL Server 7.0 on Windows 2000 Server using Terminal Services. You must connect to the console. Microsoft has documented this in a knowledge base article. http://support.microsoft.com/kb/246694
As you read through the article note that Microsoft suggests installing NetMeeting 3.01 and using the desktop sharing feature of NetMeeting to accomplish the SQL Server 7.0 install.
Unless you really feel the need to use NetMeeting I would recommend Dameware or Gencontrol for the SQL Server 7.0 install.