Hi churin and welcome to Windows 7 Forums
I would actually never contemplate on upgrading one OS to another - a clean install is by far the best way to go. True, installing the upgrade version of Vista as a clean install means that you actually install Vista twice, once on an empty drive/partition and then as an upgrade over itself, but it is the same OS. I would expect that the same (or similar) procedure would be true for Windows 7. This could explain your first problem.
As for your second problem, it is possible that your download is corrupted for some reason or other. You could try downloading it again to see if that is the problem.