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Q7: "What was wrong with the system in place prior to 1st August 2007?"

Most buyers and sellers are very dissatisfied with the current system for house buying and selling. The introduction of HIPs and the other parts of the Housing Act 2004 were introduced precisely to start the process of radically overhauling the conveyancing process and bring the legislation into the 21st century.
The Risk Assessment section of the Communities and Local Government (CLG) document entitled Home Information Packs gives some details of the findings of research carried out in 1998;

28% of offers made and accepted to purchase houses failed (this extrapolates to 583,000 failed transactions per year, based on 1.5 million successful transactions in 2002)

A typical failed transaction cost about £900 (£680 for Buyers and £226 for Sellers). This was mainly Conveyancing costs, mortgage valuation and survey fees. This had increased to £1000 by 2002. This does not include additional and abortive costs by Marketing Estate Agents.

It took an average of 8 weeks from offer acceptance to exchange of contracts. This is slow by international standards.

So to answer the question, What was wrong with the Old system?

Key information available too late in the process.
The Government considers a 28% transaction failure too high resulting in a high overall unnecessary expenditure by buyers and sellers.
The transaction period is too long and getting worse. This appears to be confirmed by a more recent survey by the Building Research Establishment (BRE) and Ipsos MORI where the average transaction period was found to have increased to 81 days.
Also from the BRE/MORI study; the average (mean) transaction time from marketing to completion was a staggering 6½ months. 9 months was and is not uncommon.
Too much time wasted in carrying out duplicated searches and surveys (paid for by the buyer)
Voluntary schemes to improve matters have failed.
System was largely unchanged since the Law of Property Act 1925. The relatively recent explosion of the Internet has radically changed the methods of information exchange and how many business transactions are carried out. The Property transaction businesses were unable to take best advantage of these new systems.

Further information can be found Housing Market Analysis and down loaded here.