Before you do anything make sure you take back ups and save those to your PC incase you need to wipe the card and start fresh!
Summary: Download the RC1 file from CM7. Don't change the name or unzip. Place the file in the boot partition (the only place the pc will see when you access the card to copy the file over) with the other zip files you used to create your original card. Boot recovery by holding Power + n and the ROM should update.