Yeah, forget the Starwood $25 for 500 points valuation --- that allows *wood to make a tidy profit from each sale and does not really reflect the balance of the program.
On average, I assign my Starpoints approx 2 US cents per point. So, a cat 4 room for 10,000 points a night works out to about $200. That's my baseline average.
That means a cat 3 (7000) is ~ $140.
Use the 2 cent rule and you'll be far closer to reality. FWIW, I would agree with other posters that use of these points for hotel stays instead of airline miles is almost always the far better spend.