Hans,
All the files in the book must be opened at least once. When they are opened, they are converted to FM 8 (you are asked if this is OK).
At that point, you can generate a PDF. It's up to you whether you then save the files as FM 8 format or not -- if you abandon the updated file, you'll need to convert them each time you work on them.
If I were you, I'd make a backup copy of the FM 7 files for the archives. Then roll the files forward to FM 8 and go on with life.
And yes, of course, apply the patches. But the patches don't have anything to do with the problem.
Art