BI 4.0 BICS connection from Webi and Information Builder

We have a BW implementation using BW 7+. We have not upgraded any of our queries and they are still in 3.5, everything else runs in 7. When I user Information design tool I am able to make a BICS connection to our BW without selecting a infoprovider.

When I look at the connection and click on Show Values, I get three catalogs. One with no name and the other two are Favorites and InfoArea. I get no cubes in favorites or in Infoarea, but all the cubes are visible in the no name catalog.

When I go to use this connection in Interactive Analysis (Webi) and I select BEX based I am able to select my BICs connection. After a long pause I get on the right side only two catalogs (Favorites and InfoArea). The catalog without a name from Information design tool is not visible. As no cubes are visible except in the catalog without a name I am not able to select a cube/query for my report.

I do not know why this is happening, but I have a theory, although no way to test it at the moment. I noticed that no SAP 7 client tools can make a connection to our BW, that is if you open Query Designer 7 you get a login prompt but after login the application just quits without any notice. I am wondering if BIPlatform 4.0 requires the Client 7 tools to be allowed to make a connection in order to read the Favorites and InfoArea catalogs.

In a meeting my colleagues had with SAP they indicated BICS can use queries from 3.5, so I am at a loss as to why this happening.