It's just missing a few steps: First, remove the end from the lower (still empty) half of 7-minute hourglass, causing it to drain its sand, while it runs. When the 7-minute hourglass runs out, do the same with the 4-minute hourglass (being on its second run). Flip the (now empty) 7-minute hourglass over and let the rest of the 4-minute hourglass drain into this. As the latter runs out, flip the 7-minute hourglass for 1 minute worth of accumulated sand (minus a few grains lost over handling procedures). ;-)
Your summary is incorrect. Step 3 doesn't match what GPT-4 actually said:
> When the 7-minute hourglass runs out, don't flip it yet, but note that the 4-minute hourglass has now been running for 3 minutes on its second run. (This marks 7 minutes.) When the 4-minute hourglass runs out again, flip the 7-minute hourglass. (This marks 8 minutes.)
Notice that GPT-4 says not to flip H7 when it runs out, which is a mistake.