It depends on what you mean by "I am getting dressed at seven o'clock". If you mean it as a present tense statement, it doesn't make much sense -- it's not very natural in English. Whereas if you're stating a future intent, that you will get dressed at seven o'clock (at some point in the future), then it's perfectly valid, and DL teaches us that French present tense can also express a near future action, e.g. Je vous appelle demain: https://forum.duolingo.com/comment/415951/
For that reason, I think it should be accepted, unless someone can say why it shouldn't be.
Doesn't this sound the same as „je m'habille à cette heure”, which would be also grammatically correct?
s'habiller rarely means to "dress up" however it is used in this sentence:
Nous nous habillons plus spécialement pour ce mariage. "We dressed up more than usual for the wedding."
However, its more usual usage is : "to get dressed".
Allez, habille-toi, on va être en retard !
"Come on, get dressed; we're going to be late!"
J'ai dû m'habiller rapidement ce matin parce que j'étais en retard.
"I had to dress quickly this morning, because I was late."
For your info, "to dress up" has a figurative translation in French "se mettre sur son trente-et-un".
In English there's an idiom "dressed to the nines" which means dressed up.