Has anyone ever won by conquering all the 7 cities?
I won by taking all seven cities as the Saracens in my most recent game. I've yet to see the Franks even come close.
I've seen it almost occur when the Franks weren't aware of the rule, but had forces. When I realized that my opponent wasn't thinking about the seven cities condition, I pointed the rule out to my opponent and let him take back the move that would have ended the game. It would have been a cheap win.
The most recent 7-city event, the win was unavoidable. After the fall of Jerusalem, the Franks were down to one block on the entire board (the one they just drew the turn before), and the Saracens hadn't lost any Emirs, and had all their pieces on the board.
Yes, it can happen.