Was Psalm 2:7 fulfilled when Jesus was baptized?
This is clearly a dispensation issue. John was God's messenger to the Jews with instructions to tell them that Christ's earthly kingdom of heaven was at hand--the Son-of-man and Son of God King was alive and visibly walking in the flesh in Israel. Both John's message and baptism was directed only to the Jews. John's liquid water baptism was to make manifest Jesus (in the flesh) to Israel, in John 1:29-31:
The next day John seeth Jesus coming unto him, and saith, Behold the Lamb of God, which taketh away the sin of the world. This is he of whom I said, After me cometh a man which is preferred before me: for he was before me. This is he of whom I said, After me cometh a man which is preferred before me: for he was before me. And I knew him not: but that he should be made manifest to Israel, therefore am I come baptizing with water. (My emphasis)
This is the question that naturally arose in John 3:25-26 concerning that Jewish earthly matter of purifying that existed under the law of Moses:
Then there arose a question between some of John's disciples and the Jews about purifying. And they came unto John, and said unto him, Rabbi, he that was with thee beyond Jordan, to whom thou barest witness, behold, the same baptizeth, and all men come to him.
Both John's message and baptism were perfectly explained by John in John 3:27-36:
.... He must increase, but I must decrease. He that cometh from above is above all: he that is of the earth is earthly, and speaketh of the earth: he that cometh from heaven is above all.... And I knew him not: but he that sent me to baptize with water, the same said unto me, Upon whom thou shalt see the Spirit descending, and remaining on him, the same is he which baptizeth with the Holy Ghost. (My emphasis)
Two different baptisms and two different messages: John's was concerning the visible Kingdom of Heaven on earth. Jesus' is the invisible, spiritual heavenly Kingdom of God--"that cometh not with observation."
When John fianally baptized Jesus, that was the fulfillment of John's mission--that He should be made manifest to Israel as the living flesh and blood Son of God who would be both the earthly King of kings and the heavenly Savior. That message of these two dispensations has become the Gospel of Jesus Christ who is over all things, heavenly and earthly.