I originally made an app for WP7 then a while later decided to do a complete overhaul of UI and code which is when WP8 came out so I took down the old app and made a new one
As per the above answer there is no automated way to revert the projects; however I usually separate out as much logic as I can into a Windows Phone class library which can be shared by both Windows Phone 7 and 8 projects. So my advice is to copy across what you can (VMs, Services, etc.) to a separate class project, setup a new Windows Phone 7 project, and bring across your WP8 views and remove any incompatible bits such as the new maps control and reference the shared library between both platforms.
No, unfortunately you cannot downgrade a windows phone 8 project to windows phone 7. You can only upgrade a windows phone 7 project to windows phone 8.