Andrew,
This is a SQL BATCH, not a stored procedure! If I recall correctly, "with recompile" would not be applicable...
And, if it had been a stored procedure, and in order to let the optimizer perform its magic and forego the forceplan option, I would have left the index on #T1.C1, added the index on #T1.C7 and then executed the query joining #T1 and E in a SUB procedure.
Regards,
Jean-Pierre