If I book through AAA staying for 9 nights/10 days can pay for only 7 days worth of DDP? We plan to be at Universal/IOA for at least 2 days and wont need 10 days worth of the DDP.
This is correct. Each member of your party has to get DDP for each night of your stay.
One thing you might consider, though, is using some of your TS credits for Signature Dining (2 TS credits per meal). That way, you can try some great restaurants and not "waste" your DDP credits.
You can, if you make 2 separate reservations: do one for a 7nights/8days package, do a check-out/check-in after 7 nights and book room only for those last 2 days.