Arduino multiplexing help needed.
Yes, it's possible. If you want to build a 7 to 128 demux with 3-to-8 and 4-to-16 demuxes, then put the 3 high bits of your output address into the 3-to-8, and use the outputs of that as the input enable to the individual 4-to-16 demuxes (assuming that it has an enable pin), so the output #0 on the 3-to-8 would go to the input enable of the first 4-to-16 demux, the output #1 would go to the second, etc.

Then you send the lower 4 bits of the address to all of the 4-to-16 demuxes. Ultimately you should get one wire high as a result out of 128.