So basically update to IOS 7.0.4 as this is the most recent IOS ( before IOS7,1 comes out and just wait for cydia to work ) ?
Must the phone / Pad be restored or can I Jailbreak on top of an existing Jailbreak, I.E not lose all stuff on the phone and just use evasion over existing JB ?
Yes, you can update to iOS 7.0.4, jail break it and then wait for Cydia to be updated.
Or, you can just keep an ear on the news. If Apple were to release an update (either 7.1 or 7.0.5), you will have a brief span of time to upgrade to iOS 7.0.4. An update closes the old iOS version, yes. But - it is not instantaneous, so you do have time to complete the upgrade to the newest version.
One thing you can do, should you choose to wait at your current iOS: download the iOS 7.0.4 IPSW file for your particular iPad. In an update, that is what will take the most time as it's a huge file. Keep the IPSW and, when you're ready, it'll be readily available to use.
Just know that the only rush you will be in, once you hear of a new release by Apple, is to get iOS 7.0.4 onto your device. Once you have that iOS loaded, then you can decide when to jail break it. There will be need for a rush...
For example, I've got two siblings with iPhone 4Ss. They are running iOS 6.1.2 and they are still jail broken. However, I have downloaded the iOS 7.0.4 IPSW for them and they are, essentially, on standby. They know that they must drop everything and have me upgrade their phones as soon as a new iOS is dropped. The same goes for my iPad Air and iPhone 5 - I've got the IPSWs and am "standing by."
As for your last part, no, you cannot run a jail break tool over (well, as a general rule). You will need to start with a clean (stock) iOS 7.0.4 before you run the evasi0n7 jail break. Just make a backup prior to the upgrade and you'll be fine.
Marilyn