If combat is resolving, I have a 5 might unit, and the enemy has a 7 might unit and a 4 might unit, can I assign my damage to the 7 might unit or do I have to assign lethal damage to the 4 might unit?

Yes — you can put all 5 damage on the 7 Might unit. Nothing forces you to kill the 4 Might unit first.

The lethal-damage rule (465.2.c.3) only prevents overkilling: you must fill one unit to lethal before moving to another, and can't assign more than lethal to a unit while others remain. It never requires you to kill every possible target. So 5 damage on the 7 Might unit is fine — it just survives with 5 marked.

What you can't do is split 2 and 3, or dump all 5 onto the 4 Might unit (that would overkill it while the 7 Might unit takes nothing).