Herod the Great is who I assume you mean by Herard? Herod was an extremely bloody ruler. The expression in the story "out-Herod Herod" means basically to be even more bloody and violent (or extreme) than someone (herod) who is the epitome of an extreme. An analogy would be to out-Michael Jordan Michael Jordan. That, of course, meaning that you did the "Michael Jordan thing" better than he did.
In literature one common archetype is the cycle of life. Things are born (sunrise), live (noon), get old (sunset), and die (night). The fact that the black room is in the west shows us that the room is indicating death (where the sun sets and life ends). Notice how all the "revelers" are afraid of the room? It's because the room represents death (black), and not just death, but a bloody (red) death. Get it? Masque of the Red Death?
The clock suggests time and what does time do to everyone? Well... to put it bluntly it kills us all. Notice the revelers cannot ever become used to sounds of the clock.
When I teach my classes I have them look at Gerard Manly Hopkins' poem "Spring and Fall" http://www.potw.org/archive/potw29.html
The basic idea is that the only thing any of us is REALLY afraid of is death. In this story "TIME" is the bringer of that death and a constant reminder that no matter how rich and glorious you might think you are, you're still going to die.
Where this story gets really interesting is in the masks that the people wear. Ask your teacher why they are wearing masks.
The number 7 is 3+4. 4 is important because it's directions (north, south, east, west), the seasons (spring, summer, fall, winter), elements (fire, earth, water, wind). 3 can be the trinity, (father, son, holy ghost), stages of life (birth, middle age, death). The number 7 might also be significant because on the 7th day, God rests. If God is at rest, perhaps man is on his own? Scary thoughts from the master of horror.