[release-1.21] Bump CAPI to v1.10.7

[mboersma]

What type of PR is this?

/kind cleanup

What this PR does / why we need it:

Manual cherry-pick of #5909.

Updates the Cluster API dependency to v1.10.7.

Which issue(s) this PR fixes:

N/A, but see #5761 for prior art.

Special notes for your reviewer:

TODOs:

• squashed commits
• includes documentation
• adds unit tests
• cherry-pick candidate

Release note:

Bump CAPI to v1.10.7

[jackfrancis]

/lgtm
/approve

[k8s-ci-robot]

[APPROVALNOTIFIER] This PR is APPROVED

This pull-request has been approved by: jackfrancis

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[k8s-ci-robot]

LGTM label has been added.

Git tree hash: 4945aa63dfc318bbb08e27700f8827764d91c248

[codecov]

Codecov Report

✅ All modified and coverable lines are covered by tests.
✅ Project coverage is 46.94%. Comparing base (e6a302e) to head (ab41f34).
⚠️ Report is 3 commits behind head on release-1.21.

Additional details and impacted files

@@              Coverage Diff              @@
##           release-1.21    #5913   +/-   ##
=============================================
  Coverage         46.94%   46.94%           
=============================================
  Files               279      279           
  Lines             29687    29687           
=============================================
  Hits              13936    13936           
  Misses            14938    14938           
  Partials            813      813           

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