Windows 10 will not accept a Windows 7 product key, you need to install Windows 7 using the key and then from within that install of 7 perform the upgrade to 10.
The "Fall update" or Threshold 2, or whatever you want to call it, is actually supposed to take a Windows 7 or 8 product key to activate Windows 10, without having to perform an upgrade install from the earlier Windows version. From what I've read, the Media Creation Toolkit offered this as a download, it was then pulled, but it's supposedly been re-updated (if that's a word?) - I've just downloaded the tool and it reports it's version 10.0.10586.0 which is the latest including the new update. So in theory if you use the latest Windows 10 download from Microsoft, you should be able to just enter the Windows 7 product key - assuming you're using the right key. By this I mean you'd need to be using a Windows 7 Starter, Home Basic, or Home Premium key to activate Windows 10 Home, or a Windows 7 Professional or Ultimate key to activate Windows 10 Pro.
Hope this makes sense and is of some help.