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I use the following widget to display products on the home page for new products

<p>{{widget type="catalog/product_widget_new" display_type="new_products" products_count="10" template="catalog/product/widget/new/content/new_grid.phtml"}}</p>

How do I list products from a category under this?

I have tried using this:

{{block type="catalog/product_list" column_count="4" category_id="7" template="catalog/product/list.phtml"}}

but it doesn't do anything?

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Magento 1.9 adds some permissions feature about including blocks in CMS content

Check this Product list by category in CMS page

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Have you create permission. If not then you can create permission from System->Permissions->Blocks

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