Yup, what you see through the viewfinder even with Show Effects of Settings is the ambient exposure. The camera doesn't try to estimate what the flash in manual or iTTL mode would do in terms of illuminating the scene, it just shows you how the exposure for ambient light will look. When shooting Fill Flash or Key Flash situations where the ambient exposure is part of the final image that's very handy. When shooting scenes that are fully flash illuminated you typically have to take a test shot or two to see if everything is set up the way you want as the ambient exposure will generally be several stops or more below the level of flash lighting if you don't want ambient light to influence the final image.
You can set up your SB-700 to use flash Modeling to get an idea of how things will look prior to the final exposure but realistically I only do that when working with multi-flash setups and in a controlled environment where it's helpful to get multi-flash setups balanced for the right kind of directional and fill light. Even then you're still basically firing the flash in the modeling mode before you see the effects of using the flash.
