from what i understand, they come over at Level 0, with auto levelups to take them up to Lvl 5. that way you can choose how to make those first 5 levels go.
the gear is another question tho. nothing "uber" comes over. seems to be stuff that could be used by a Level 5 party. excpet for one or two weapons that are good. (i haven't played so i don't know the names, sorry.)
there has been one standard complaint tho. that is with all the class changing that was done in 7, some of the ones that have been brought over are not really that great for this game.
but since you have held your group this long, you really should let them try it at least. ::smiles:: they might completely blow you away.
V***V
::EDIT::
oh btw
go here to read other's opinions. these are a few comments by peeps who have imported. it actually looks to be a toss up on the opinions about bringing over a party.