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The psychological effect is "tendency towards the mean", and in this case, the mid-point isn't the mean.

Forcing individuals to choose a score above or below the mean yields a better sampling of the true distribution in this case.

What? 1+2+3+4+5+6+7 = 28. 28 / 7 = 4. So 4 is both the midpoint and the mean?

Perhaps people don't differentiate between 1-7 and 0-7 and assume that 3.5 is always going to be the midpoint?

That is correct.

So when they pick 4 on a 1-7 scale, it's not neutral but good, because it's above 3.5?