How come when you create character
and start the game it starts you out at level 7.
Is there a reason for this. I would like to
start out at level 1. Also can you create a human cleric and duel him to a fighter
right away or am I mistaken.

When you start a new game you are given 89,000 experience, because this is a sequel, thus you're not starting out brand new, you're already supposed to be a seasoned adventurer. If you were to start up a level 1 character, you'd get slaughtered in the first battle you came across.

Play BG1 if you want to start at lvl 1 and when you finish transfer him/her over to BG2 to carry on the story. Yes, you can dual straight away, IF your character has the correct stats.