Exercise a fowl to produce a more beautiful bird (7)
I believe the answer is:
peacock
'a more beautiful bird' is the definition.
'peacock' can be an answer for 'bird' (peacock is a kind of bird). I'm unsure of the 'a more beautiful' bit.
'exercise a fowl' is the wordplay.
'exercise' becomes 'pe' (Physical Education).
'fowl' becomes 'cock' (cock is a kind of fowl).
'pe'+'a'+'cock'='PEACOCK'
'to produce' is the link.
(Other definitions for peacock that I've seen before include "Male bird" , "Dandy" , "showy type" , "Thomas Love --, author" , "Gaudy bird" .)