I think that this issue is definitely one for the Steinberg coding squad - they are currently really snowed under (pardon the pun) so they are taking up to a week to get back from recent experience; so just bare with them and I’m sure they’ll help you get things sorted out!
Forget about re-installing Windows 7, I’m sure it won’t come to that, it will most likely be an eLCC license issue preventing you from entering the demo mode because of the presence of your existing Cubase 7 Artist license which could be interfering with the demo (i.e. probably instantly reverting your Cubase 7 Demo version back to the Artist version).
I presume the license for the Cubase 7 demo is actual a Software eLicenser (SeL) (i.e. based on your hardware) as they wouldn’t make you own a dongle to use a demo. As such, have you tried removing your dongle (with your Cubase 7 Artist License) then trying to run the demo again with out it attached?
This should force the demo to run using the Software eLicenser (SeL) instead of the dongle containing your Cubase Artist 7 license.
This is only a guess mind; but it is worth a try, it makes sense in theory at least (it is what I would try under your circumstance), also remember to run Maintenance in the eLCC so as to clean up any issues that could be causing conflicts.
Thanks for the response. I actually got a response from Steinberg and everything is working great. Here is the response they sent me to help out, hopefully it will help others that are, or will experience the same issue.
Cubase 7 and the 7 Artist share the exact same installer it is a preference and the license that determines which one opens. As you have already licensed and set the preference for Artist that is why it continues to open.