Not unheard of for 7-yr-old's

Kids have their first round of 'awareness' around this age. My older son is in first grade, he was just kissed by a girl. (a story in itself for later)

I even remember myself talking to other girls which boy I was interested in dating, when I was back in first grade (of course back in China). Then that was it, nothing happened throughout the entire elementary school years.

In your daughter's case, I would say, everyday hugging and missing is too much and should not be encouraged. I would talk to the teacher, and ask the teacher to pay attention to such behavior and maybe help separate these kids in different groups during activities. I would tell your daughter such behavior is inappropriate and discuss with her how to handle it... she needs to learn how to express herself when facing boys (she needs to learn this skill sooner or later).

But I would not make a huge deal out of this... 外松内紧 is a good approach to apply here.