Those 7 cards you draw become your hand, so, yes, it means to check there. The only place cards can enter play from is your hand unless a card effect specifically says otherwise. However, for prizes, you pull those off of the top of your deck after you've set any Basic Pokemon in play from your hand. You don't set those in the prize area until you've actually got at least 1 Basic Pokemon face-down and in play, so if you have no Basic Pokemon in play, you shuffle your hand back into your deck and then re-draw your hand, which will still consist of 7 cards. If you've had to re-draw your hand in this pre-game phase, your opponent may choose to draw an extra card from their deck if they had any Basic Pokemon in their hand.
I recommend buying the Black & White Trainer Kit deck since you seem to be fairly confused by the game setup phase. If my memory serves, the handbook that comes with each half-deck in that will walk you through the setup steps for a match in a bit more detail than the stuff included within a Theme Deck.