I've approached the problem the following way :
Out of the 7 dice, I select any 6 which will have distinct numbers : 7C6.
In the 6 dice, there can be 6! ways in which distinct numbers appear.
And lastly, the last dice will have 6 possible ways in which it can show a number.
So the required answer should be : 7C6 * 6! * 6/(6^7) which on simplifying becomes : 70/(6^3 * 3).
However, the answer given is 35/(6^3 * 3).
Where exactly am I going wrong?
Here's a very simple, structured way of doing it. Consider a multinomial distribution with 6 outcomes. In $n=7$ trials, you want exactly two of one face and exactly one of all other faces. There are 6 equally likely situations, since it is equally likely that a face will be the one showing up twice.
For a single case, say, the probability that there are two 1's, and one of 2,3,4,5,6. The probability of this happening is $$ {7\choose 2,1,1,1,1,1} (1/6)^7. $$ Then accounting for all six equally likely situations, the final answer is $$ 6\cdot {7\choose 2,1,1,1,1,1} (1/6)^7=\frac{7!}{2!} (1/6)^6, $$ which simplifies to the correct answer.