Technically it is a bad idea to shoot at lower megapixel (unless you drop it to 1/4 of the original).
This is because the sensor comprises of pixels, so if you have 10MP then you choose to shoot at 7MP, technically the entire picture is an interpolated image that has lower resolution. Try this on your LCD monitor, set it at the native resolution (typically 1280x1024 for 17") then reduce it to a lower resolution (e.g. 1024x768). You will see that the display is now less sharp. The same phenomenon will happen with the sensors.
This is because the sensor comprises of pixels, so if you have 10MP then you choose to shoot at 7MP, technically the entire picture is an interpolated image that has lower resolution. Try this on your LCD monitor, set it at the native resolution (typically 1280x1024 for 17") then reduce it to a lower resolution (e.g. 1024x768). You will see that the display is now less sharp. The same phenomenon will happen with the sensors.