I have installed Magento 1.7.0.2 on Ubuntu 12.0.4 server and everything works.
Testing REST API with an admin role (http://1.2.3.4/magento/api/rest/products) I get t
You should try these for this problem in api:-
1)change the value in the file /app/code/core/Mage/Api2/Model/Auth.php, change the value of: DEFAULT_USER_TYPE = 'guest' to DEFAULT_USER_TYPE = 'admin'.
2)change the value in the file /app/code/core/Mage/Api2/Model/Auth/Adapter.php, change this line from return (object) array('type' => Mage_Api2_Model_Auth::DEFAULT_USER_TYPE, 'id' => null); to this: return (object) array('type' => Mage_Api2_Model_Auth::DEFAULT_USER_TYPE, 'id' => '1'); (note:only change null to '1').
3)restart your server(for apache run this command: sudo service apache2 restart). i hope these steps will solve your 403 access denied problem.