Step 1: Rebuild the key positions using the anchor equation: C is fixed at position 7 (clue i), and clue (ii) gives $7-p_A-1=3$, so $p_A=3$. Clue (iii) then places B at position 2.
Step 2: Positions 4, 5, 6 hold E, F, G with F immediately right of E (clue vi), so (E, F) = (4, 5) or (5, 6). Clue (v) forbids E from sitting next to A (position 3), which rules out E = 4. So E = 5, F = 6, and G = 4.
Step 3: The question asks for the person exactly midway between A and E. Using the midpoint formula for two positions $x$ and $y$: $\text{midpoint} = \dfrac{x+y}{2}$.
Step 4: Substituting A's position (3) and E's position (5): $\dfrac{3+5}{2}=4$.
Step 5: Position 4 is occupied by G, so G sits exactly between A and E.
Step 6: Checking the other options confirms this: B is at position 2, F is at position 6, and D is at position 1 - none of these is at position 4.
Correct option: G