The Freaks aspired to heroism, but they didn't call themselves the Seven Heroes, but the Seven Freaks. It's other people who courteously call them the Seven Heroes of Jiangnan. In any case, the Freaks were competent enough in their part of the world, and they conformed enough to the xia model, using their abilities to help the weak, that they deserve that respect. Other than the main characters, are there many others who were better xias than the Freaks? The average Quanzhen or Beggar Clan member, whilst of lesser ability, was also less humble than any Freak, and more precious of their status.
I honestly think this is a poorly constructed plot-hole in the novel. LOCH is a great novel, but not without lotsa flaws.
It also doesn't make sense that Yau Chui Gei didn't get YK out of the Jin palace. He played a big part in messing up YK's character by never telling him about his true identity.
In the GJ v YK fight, it was stated that GJ had far superior inner power, but he was more naive in combat (hence suffering more hits). YK was taught by QCJ but he likely didn't concentrate on learning MA that much. Besides, GJ's personality is more suited to learning advanced inner arts and thus he could progress much faster.
"Anything you can't say NO to is your MASTER, and you are its SLAVE."
"I disapprove of what I say, but I will defend to the death my right to say it."