No, the L7 does not support iTunes. For that you'll have to buy the Motorola RAZR V3i which has iTunes support. The L7 only has a basic mp3/aac player. Although you won't be needing the iTunes as the service is not yet launched in India.
Yes the L7's player also works in the background. You can do other things while listening to music. Although i don't think you can use the camera while listening to music. In most phones activating camera pauses the music.
I own an L7. It doesn't support aac format or mp3s above 192 kbps bitrate. Mp3s at or below 192 kbps are supported. But the player doesnt work in background when using camera. Not a big deal this, though. Buy it if you can ignore the no-fm part. iTunes is really not needed IMO, the motorola digital player has a great deal of control. If you have any doubts, ask me.
Yes you can type sms and use gprs while listening to music. As for rating the phone, I'd say 3.5 out of 5. -1 for no FM and - I don't know if it's a problem with my piece or all, but the signal reception is slightly on the weaker side. But you won't have this problem in chennai, I had full signal strength over there. But to be honest, this phone has no other problems, it's absolutely wonderful not to mention its super-slim. I don't think any other phone in the same price range offers the same amount of features AND beauty.