The question is whether or not he intended FM7 and just put F7 as a figured bass-type symbol without realizing the confusion that might be caused. If not, then the chord could simply be an occurance of passing tones. An incidental or embellishing-type chord. (F moves up by step, A, C, and Eb move down and voila! G major chord with the Eb as a chromatic passing tone from the E from the previous C dominant chord. Even though the C7 seems to point to the F as a functioning chord, the voice leading could derail our expectations and therefor make the movement to G viable.)