I think django-south still works with Django 1.7 (????), but is considered depreciated compared with the Django 1.7 built in migrations.
I was wrong. django-south will not work with 1.7, and quite possibly never will work with Django 1.7 - I haven't seen this anywhere official yet, but not looked hard either.
There are only two packages I have found so far that are broken with Django 1.7 so far, one is Django, and the other is python-ajax-selects (which needs new upstream release to fix).
For django-south,
You are expected to do all database migrations with Django 1.6, then upgrade to Django 1.7
Or install from scratch with Django 1.7 and new migrations.
This is going to be a pain to manage upgrades.
Attempt to summarize the problem: You want to make sure Django 1.7 is never installed if there are any apps with Django south migrations that haven't been run, and if Django 1.7 is installed you want to make sure django-south is not in INSTALLED_APPS.
Think of the situation where somebody does an "apt-get dist-upgrade", and upgrades the packages containing the migrations and Django at the same time.
My brain hurts. Going to think about this some more tomorrow.