While we may (or may not) be entering a period of low interest rates, that is only the immediate future. We're talking about what interest rates will be, on average, FOREVER INTO THE FUTURE. That is the crucial point. Are you willing to bet your investment dollars on the proposition that interest rates are going to remain at 5-7% FOREVER INTO THE FUTURE (essentially you're making a prediction about future interest rates)??? Buffett isn't. So he uses 10%. Not too long ago Buffett said as long as interest rates stay low and ROE's stay high, stocks need not be considered overvalued. But he said neither of these conditions was likely to remain true in the long run (so better not use a 5-7% discount rate in your valuation calculation).
Incidentally, there are indications that, while some people believe we're heading toward a period of low interest rates, Buffett believes the opposite. First, Buffett has sold all of his zero-coupon government bonds. The value of zeroes goes up when interest rates go down (which was the case last year, so Buffett made a killing), but their value goes down when interest rates go up. Buffett's decision to sell all his zeros indicates he believes interest rates will not continue to go down. Second, Buffett sold some of his Frediie Mac last year (and is probably selling more this year) for the same reason that he sold his zeros: mortgage interest rates are going to go up.