Going FX is the last thing I would do. You bought a long lens because you can't readily get close to the subject; why would you want to give up the 1.5x FOV factor of your DX body?
It's hard to analyze the image you posted, but I have a couple of thoughts:
Yes, f/14 is non-optimal. However, diffraction effects aren't all that severe at f/14; certainly they are a second-order problem. Deal with the larger issues before worrying about those. Still, you should be able to shoot that lens wide open and get sharp images. Or stop down a bit, say f/5.6, to be sure.
I do think the underexposure masks some of the sharpness. After all, sharpness is just high contrast between adjacent pixels. When you underexpose, you limit the possible contrast.
Also, I would shoot at the lowest ISO that's practical. You are at ISO 500 in this shot. You could have exposed at ISO 100, 1/1000, f/4.5 or thereabouts. Or if you wanted a bit more DOF, go to f/6.3 and ISO 200. The D7000 does a nice job at ISO 500, but when you are severely cropping -- and underexposed -- you can see the noise that's creeping in and causing loss of detail.
But the biggest issue I see is that the subject is just too small in the frame. In this case you had plenty of light, so you could have added a teleconverter to make the subject better fill the frame. A 1.7x or 2x TC would not have been out of place here. In my mind, that would have been the number one thing you could do to make a better image (other than actually getting closer, of course).