1) If you delete all the partitions and reformat the hard drive, everything on it will get nuked including the vista recovery partition. FYI, you can nuke that partition from within win7 also, if you are able to see it in Disk Management.
2) Follow Karlsnook's advice.
3) Are you one of the Digitalriver downloaders? In that case (or even otherwise) you can create a bootable dvd from your downloaded files and free up your flash drive. In fact, the Digitalriver iso is available for download. Of course it will work only with a proper key, so make sure you dont loose the key.