IPhone 5 says photo library is 7.1 GB but isn’t and Storage Full prompt is shown

First question: yes, iCloud backs up your photo as it is. If you delete media from your photos library it will be deleted from iCloud. (I might add that videos are also stored in the cloud - and consequently take up the most room).

Second question: It is possible you can use the Scanner and Camera wizard to import photos from your iPhone. Here is are two articles that briefly describe the process.

• Tech Recipes
• OSX Daily

Before you delete all (or most of) your photos off your iPhone, I would recommend that you double check that everything has been transfered correctly so you don't lose any pictures.

You probably already know this but it's worth mentioning anyways. When you go to delete photos from your iPhone, open the Photos app, click the Camera Roll album, then select the box with the arrow icon at the top right of the screen. Select pictures to be deleted, then tap the Delete button in the bottom bar (this is also a way to email more then one picture).

Of course, the other option would be to turn off the iCloud backup of your photos. (You already know how to get there but go to iCloud > Storage & Backup > Manage Storage > [your name] iPhone > Turn Camera Off.)

If you wish to "keep" the videos or pictures and also clear your iDevice, make sure you sync or backup your pictures in any way you choose before deleting. The EASIEST way to delete All pictures and/videos is to attach your device to a MAC with an USB cord. Start the app "Image Capture" and select all content you wish to delete. Once selected, there is a delete function inside of image capture, choose this and all selected content on your iDevice will be deleted.