Balfa BB7 + Fox 40, how much travel ?

Whatever feels better. I ran my fox 40 at seven inches when I used to own a yeti asx so it wouldn't chopper out that frankenbike so much...

Measure the axle to crown height of your current setup... If you like the way it handles, try to get the 40 to a similar axle to crown height. If you want to alter this slightly you can either lower the travel the fork or simply move where the crowns sit on the stanchions (while maintaining the minimum amount of exposed stanchion).

it depends on the year of the frame, first and 2nd gen bb7's (99-02) were built around a generation of 7" forks, the 3rd and 4th gens(02-05) are based around the beginnings of the 8" for generation

easy guide to the bb7 from what i remember

gen 1: similar in looks to the gen 3/4 but slighty awkward and boxy looking, 7.5" travel

gen 2: large box section coming down from the head tube with the down tube about 1/2 of the way down protecting the shock coming down to the bb, shock mount is though the frame behind the bb

gen 3: again a large box section with the downtube starting at the headtube, travel bumped up to a full 9", shock mounted infront of the bb, floating break option

gen 4: longer stroke shock, different link plates, small updates

For balfa bb7 history:
http://www.balfa.wooyek.pl/balfa-bb7-model-history.html