This is exactly right. The story as I heard it from the Calumet Project Manager for the Zone VI product line, was that the Type I was originally designed as an oversized 4x5. Then someone observed that it "could" be sold as a 5x7. So they did.
After they purchased Zone VI, Calumet designed the Type II Zone VI 5x7 enlarger that was large enough to actually print 5x7 negatives. When they introduced that enlarger, they also had designed a retro-head for the Type I that had a larger light source for 5x7 negatives. In the years since, I've seen only one for sale on EBay.
I have a Type II currently. Zone VI made an adapter for Beseler heads, as did Calumet of the Type II. I have the Calumet version to adapt a 45s Beseler color head to my Zone VI Type II. Works great for 4x5.
If you can find a Type II with a 5x7 head that works well, you would have a nice system. You could probably enlarge 5x7 negatives using the Type II 8x10 conversion kit. But, I think that you would be stuck using a 240mm lens, so enlargement size might be limited. You would also have to customize a 5x7 negative carrier. But, this would be relatively easy. There are also 3rd party for the Type II. If you found a Type II with a non-functional, Type II light source, one might be able to customize it with some sort of alternative light source.
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