And I will need to take note that f/11 and above will result in diffraction on a crop sensor as per Jed advised.
Correct, with diffraction being greater the further you go from f11. That is to say, it doesn't "happen" at f11 onwards and f11 is not the same as f22 for example. So sometimes if you need the DoF then you stop down some more - it's a trade off and if you're familiar with the effects of both (not enough DoF and some diffraction) then you can make a better, informed decision as to what aperture you end up using.
Next time you're out shooting a scene like this where DoF doesn't matter as much, take a shot at f8, take shots at f11, f16 and f22. And compare the differences. Then you'll have a clear idea about the damage diffraction does to your shots on a pixel level, and how bad it is at various f-stops. It does affect your quality at pixel level, and beyond, but I just don't think it's bad enough to impact getting a good 1000 pixel image.
Per your statement I guess "effectively is bumping your local edge contrast" am I right to say that is part of PP? Could I also check with you should I shoot at a lower megapixels as per what 7D offer would I encoutered such kind of softness issues as I dun really need a large resolution images.
Yes, increasing edge contrast can be done in PP. I have done that to your image above (previous page now).
I would still shoot at the higher resolution as it gives you more options particularly when it comes to PP; resizing the image on the computer and being able to work with that should, if anything, give you better results. As far as I'm aware the 7D doesn't do pixel binning when you shoot at lower resolutions, but shoots full resolution and then downsamples it. Exactly what you would be doing on the computer, in other words.