When we set the camera to M mode the exposure compensation (e.g. +2EV) does not change the aperture and shutter because we are in fully manual mode. If we set auto iso the iso however changes according to the current light metering. I'm wondering whether auto-iso affected by exposure compensation in manual (M) mode on nikon d7000?
Exposure compensation basically effects the metering. Because the camera meters to 18% gray, exposure compensation is there to allow you to adjust the parameters used to meter to account for bright subjects or dark subjects, basically by allowing you to indicate that the scene is lighter or darker than the camera thinks.
So, in that aspect, this would effect the ISO chosen by the D7000 when in auto-iso mode in an otherwise manual selection. Obviously, fully manual selections of shutter, ISO, and aperture are unaffected by compensation selection, it just affects the meter's display.