Too bad you didn't correctly boot the installer to install Windows 7 so that it would see itself as C when booted as it does when correctly installed from boot.
So I would consider reinstalling unless you can live with E since it was originally incorrectly installed from XP.
When installed second Windows 7 places its boot files on the XP partition, so in order to boot it once you image to a second HD you'll need to unplug XP HD, swap its cable to new Windows 7 HD or set Windows 7 HD first HD to boot in BIOS setup, mark the new Windows 7 Active, then run Startup Repair - Run 3 Separate Times
until Windows 7 starts on its own and holds the System Active flags on its partition. Partition - Mark as Active (Method Two)
You can then plug back in XP HD, boot it when needed using the Dell F12 one-time BIOS Boot Menu key. When ready you can delete Windows 7 partition on XP HD in Disk Management, remove any remaining Boot Menu listing in msconfig>boot or using EasyBCD Edit OS Menu tab.
Sometimes there are unseen problems like a Logical partition which in order to be marked Active must first be converted to Primary using free Partition Wizard. So I'd post back a screenshot of your maximized Disk Management drive map and listings, using the Snipping Tool in Start Menu, so we can look it over first. Screen Shots
I'd also consider using Acronis' premium cloning/imaging app which comes free with any WD or Seagate HD in the mix, or Macrium - Image your system.