You will under no circumstances lose your Windows 7 license as long as you have a genuine Windows 7 COA sticker on the machine. You can reinstall this in any way you wish and MS will protect you, which is why they put the Product Key on the COA sticker - you should back it up now in case it rubs off.
In fact most tech enthusiasts prefer to get rid of the bloatware by Clean Reinstalling Factory OEM Windows 7.
Everything needed is in the blue link. Asus may not support a Clean Reinstall but they cannot void your hardware warranty. I would simply not tell them if I reinstall. You'll get better support here anyway.
With such incompetent partitioning I wonder if Recovery will even run. Can you cue it up to see? I would also make the Recovery disks now so you have a backup if you want the preinstalled Windows 7. Another backup is to save a Windows 7 backup image of your customized install: Backup Complete Computer - Create an Image Backup
. With these backups you may feel you can afford to delete the Recovery partition.
Either way you'll want to shrink it. I'd use Disk mgmt first to see how much it wants to shrink it. But you'll need to use free Partition Wizard
bootable CD to safely Resize C to the left afterwards, which can also be used to shrink Recovery more if Disk Mgmt bumps into files in the way. You'll need to leave ample breathing room for Recovery to function. Partition Wizard Move/Resize Partition Video Help.
Personally I would rely on Recovery disks if i ever needed to fall back to factory condition to resell the unit. Otherwise I'd rely on a Windows 7 backup image of a factory install after I Clean Up Factory Bloatware
, or for the very best performance I'd Clean Reinstall.