Need game suggestions for my nephew

Terraria!

DuckTales Remastered
Castle of Illusion Starring Mickey Mouse
Disney Universe (it's a lot like the lego games)
Costume Quest (it's an rpg, but it's very easy, and clearly designed for kids)
Scribblenauts
Maybe a non-horror/suspense hidden object game? Those are very addicting
Casual games like Bejeweled, Plants Vs Zombies, Angry Birds, Zuma, etc.

Hentai games!

likely mentioned but scribblenaut games and spore my nephew loves hes about the same age X) , trove if you help him along the way and octodad gets a good laugh or two X)

I'd definitely recommend one of the Scribblenauts games. I played the original when I was younger and it was a great way to exercise my creativity :)

Orcs Must Die!
Torchlight
Salt
HOARD
Terraria/Starbound/Edge of Space/Signs of Life
Driftmoon
The Last Tinker: City of Colors
Lost Marbles
Mutant Mudds Deluxe
Scribblenauts Unlimited/Unmasked
Spectraball
A Story About My Uncle
Tales from Space: Mutant Blobs Attack

Those are the games I can think of that a little kid might like (and that I have played). Not all of them fit the fantasy theme, but I think he might like them anyway.

Some of the Double Fine games sound like excellent fits. Especially Costume Quest and Stacking.

Definitely Sam and Max. This website also recommends games for certain ages, but you would have to cross check to see what was available on Steam. I'd say the Serious Sam franchise because there is a lot of action, and you could play together...there's fairly simple puzzles. I don't remember swearing but it's a little violent.
SteamGifts
SteamGifts

He may like the game Mini Ninjas. I don't remember exactly how many buttons there are but I think you can get through most of the game just jumping and attacking. There are a couple other buttons used to change your character if you want to or to assign an item to the 1 slot you have.

It's a pretty simple game that isn't very challenging, although there are a few bosses throughout the game where he may have some difficulty. You basically just run through the levels beating up the samurai to save your captured friends and release the caged animals. I enjoyed the visuals and the fighting system, but it started to feel a little repetitive towards the end. It took me 16 hours to beat it, but I am very thorough when I play games. I like to explore every last inch of every area.

Mini Ninjas Steam Link
Random gameplay video from youtube

What about the Teddy Floppy Ear games?

Terraria and Scribblenauts Unlimited (both has zombies though)

don't know any games for 7 yo. maybe time management ones?

HAPPY cake day!

Dungeon Defenders

This is easy. Give him some Need for Speed.

PS
I have read your desrciption, but still give him so NfS. Just because he like one genre doesn't mean he wont like this one and, lets face, NfS is arcade so he should do fine.

Barbie! no?

Think most stuff is already mentioned, but Scribblenauts is very good.

I used to just throw Doom 2 on for my little cousin - turn on god mode and let him have at it.
Rise of the triad and descent were also good for that.
Older games.... but even Jazz jackrabbit kept him amused for hours.

Ori and the Blind Forest great beautiful game! But it will be not so easy for young kid.

Akiba's Trip: Undead and Undressed.

7 years old

Manhunt 1&2, of course!
Overlord, psychonauts

Disney games for a change? Castle of Illusion, Ducktales, and so on..
Board games? Point and clicks? Hidden objects? There are a lot very nice!

The more genre he tries, the better for him, I guess :)
Especially now that he's young and has a lot of free time =P

Both Costume Quest games & Trove would be good.
Some games that don't quite fit into the spells/magic/fantasy genre but seem suitable for a young lad:
Eets Munchies
Octodad: Dadliest Catch
Castle of Illusion
Quantum Conundrum
Offspring Fling!
Rayman® Origins (Co-op)
Stacking
Worms Revolution (Co-op)

Some people said Minecraft, so I will say Pokemon (it has sorta spells and fantasy animals. Don't require a lot of buttons or combos neither).

And happy cake day!

I think Scribblenauts Unlimited have everything you said xD
Magic, fantasy, spell
Everything! As long you know how to type the word of it
And it's simple not really confusing

You can be serious playing that game or just messing around, it's ok too
Hope it helped you :)

And yeah, happy cakeday!!

View attached image.

magicka
this is.

1. Guacamelee (It just gets a bit more tricky when they get shields but I don't know if that is an issue)
2. Plants vs zombies
3. Shoot many Robots