If all you are doing is extracting a 7z archive, why are you making an installer? Just make a SFX 7zip.
The best practice for an installer is to not install everything from a 7z in the first place, but to list the [Files] and let Inno compress things. It usually produces better results, both in compression and in proper handling of uninstalls.
If you really must use an external archive, then consider upgrading Inno to the latest version which already includes an archive extraction feature, so you don't need to bundle 7z.exe with the installer.
Having external flagged files with DestDir: {src} is just silly -- by definition they're already there, so there's no point in listing them at all.
Though this is also likely the real problem with your approach. AI is crap. It can sometimes generate a decent skeleton of things to get you started, but you still need to understand it to fix its mistakes and improve the design. In this case, it looks like you didn't even read the comment it generated that the archive files have to be distributed as well, because they didn't get embedded into the installer (because the AI generated crap code). So you tried to run the installer by itself and got the expected error.