After much searching I've discovered the answer. I found this blog entry by Chris Sharp who explained why this doesn't work in Episerver 7 and how to get round it. http://cjsharp.com/blog/2013/04/15/how-to-add-valid-elements-like-iframes-to-tinymce-in-episerver-7/

Here's the code in case the link doesn't work in the future:-

Extended Valid Elements Code

[TinyMCEPluginNonVisual(PlugInName = "TinyMceExtendedValidElements", AlwaysEnabled = true, EditorInitConfigurationOptions = "{ extended_valid_elements: 'iframe[src|frameborder=0|alt|title|width|height|align|name]' }")]
public class TinyMceExtendedValidElements
{
}

Empty File Handler (for when the script is missing)

public class EmptyFileHandler : IHttpHandler
{
    public bool IsReusable
    {
        get { return true; }
    }

    public void ProcessRequest(HttpContext context)
    {
    }
}

Web.Config update

<configuration>
    ... some configuration ... 
    <location path="util/editor/tinymce/plugins">
        <system.webServer>
            <handlers>
                <add name="TinyMceExtendedValidElements" path="/util/editor/tinymce/plugins/TinyMceExtendedValidElements/editor_plugin.js" verb="GET" type="MyEPiServerProject.Business.Handlers.EmptyFileHandler, MyEPiServerProject" />
            </handlers>
        </system.webServer>
    </location>
</configuration>

Episerver.Config update

<episerver>
... some configuration ...
<tinyMCE mergedConfigurationProperties="valid_elements, extended_valid_elements, invalid_elements, valid_child_elements" />
</episerver>