Windows 7: Basic Download and Install question

Hi. I ordered the win 7 professional upgrade from Digital river and i will be doing a custom install from XP.

I've downloaded the file to my system. My basic question is ?

1. Should i copy the setup files to a External Hard Drive and run Setup.exe from there (or)
2. Should i write these files to a DVD and run Setup.exe from there



or
3. Run setup.exe directly from my system from the download location.

since custom install will format my C drive and install the new OS im not sure how option 3 will work

Thanks

I'm going to assume that you have downloaded the disc image of Windows 7? In this case, you should burn it to a DVD. Backup all of your programs and files to the external hard drive (if you haven't done so already), and then boot the computer from the Windows 7 DVD and install it from there.