Remove deprecated pytest stuff for newer Python

[derailed-dash]

There were a number of changes required to make this work with a newer version of Python. I've made these changes and tested with 3.10 and newer.

Changes are:

• Updated Dockerfile to Python 3.12 rather than 3.7-bustser
• Removed deprecated version attribute from compose file
• Removed python_paths variable from pytests, which causes a key error and is not required
• Removed all references to pep8, since it is no longer supported
• Updated requirements to resolve incompatible dependencies