Ok, so now that it’s the weekend, I was finally able to take the time to look at the Hebrew text closely when I’m actually awake. It’s interesting (as always). The Psalms, being poetry, are notoriously difficult to translate. One reason is that the pronouns (which often have unclear antecedants even in prose) are particularly vague in many places, and seem to switch person arbitrarily, even when refering to the same antecedant.
A perfectly plain and literal rendering of v. 7 (v. 8 in Heb.) of the Masoretic text would read: You, LORD, observe them; you protect us from this generation forever.
The verb in the first clause is tishmerem, with the root Shin-Mem-Resh: protect, observe, guard, keep (as a promise or commandment). The ending is a third-person masculine plural pronoun (Eng: them) that most likely (it seems to me) refers to the imrot (*words, opinions, promises [NRSV]) of the preceding verse.
The second verb is titsrenu, with the root Nun-Tsade-Resh, a synonym for the first: guard, preserve, keep, observe. Its ending is a first-person plural pronoun (Eng: us). A literal reading would indicate that it refers to the Pslamist and his fellows as being protected. (“You protect us from this generation forever.”)
Both the KJV and NIV (also the NRSV, for that matter) change the meaning of one or the other of the pronouns. As I noted, the poetic form of the Psalms makes clear identification of the antecedants very difficult. It is plausable (I think) that both pronound do in fact have the same antecedant, but this can’t be seen in English without changing one. There may be reasons (such as the normal conventions of Hebrew poetry) for thinking that this is in fact the case here. (It may, for example, be rare for pronouns in different halves of the same verse to refer to different antecedants. Hebrew poetry is based on parallelism.) I simply don’t know enough about Hebrew poetry to do more than speculate.
It is possible that the translators of the NIV and NRSV were influenced by LXX which, if I can decipher the footnotes to my Hebrew text correctly, in a few copies translated the object in the first clause as us. This was not noted in the NRSV footnotes, as I believe it would have been if the translators had not believed their translation to be supported by the Masoretic text itself.
In short, neither the KJV nor the NIV gives a plain, literal translation of the verse. This is not surprising in the case of poetry. The NIV reading has some ancient support that the KJV lacks. Both, however, are based directly on the Masoretic text. The obvious reading to me (not taking into account subtleties of Hebrew poetry) is that God keeps his promises, therefore we will be protected “from this generation” forever.