We use sp_addalias with database scripting. Does the concept of db_owner in SQL Server 7.0 mean the alias concept does not exist anymore?

Aliases still exist in SQL Server 7.0, but don't use them, because they are going away in a future release. If you want to have the same functionality (for the most part) as aliasing a user to database owner (DBO), simply add the user to the db_owner role. The only caveat is that the users must now create objects with the qualifier DBO. For example, instead of:

CREATE VIEW myview AS 
SELECT * FROM authors

run...