I have tried the xad module for 7z off of Aminet and it was VERY buggy and didn't recognize the 7z files I tried.
I find that incredibly surprising, my inbox would be inundated with emails if that was the case.
To recognise files it simply looks for the file header "7z" (and the next few bytes, whatever they are). This is the official header for 7-Zip files, so if it isn't recognising them your files are probably the issue.
I'm aware of potential stack overruns but these won't occur until it hits PPMd decompression. Most 7-Zips use LZMA or LZMA2.