Background color set to black, Normal text color set to white.

Try:
//echo $+(,$color(background) text here should be black:text here should be white)

The text I see is all displayed in a white colour.

Clean mIRC in separate folder with clean mirc.ini file.

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Regards.

This is intentional behavior. mIRC now prevents you from displaying text that is the same color as the background.

You can still make text the same color as the background if you specify both the foreground and background color when setting it.

For example:

Just to add to what drum said, the reason for the change in v7 is because there are times when people will write in colored text and you can't see it on your screen without highlighting it because their color is the same as your background color. This solves that problem for people.

For the times when you want to hide the text, you can easily specify both foreground and background color and it will be hidden. There are times when you want this to happen (trivia scripts to prevent easy cheating even though it's not hard to bypass, aligning text, etc). But in most cases, people want to see any text being sent to them and this fixes that without preventing scripts from hiding text if needed.