Are you saying you want to reinstall 7 , this time installing Ultimate - using the key you bought?
You can use the installation media you already have - but you need to delete the ei.cfg file from the sources folder.
To do that, you either need the paid version of PowerIso, MagicIso, or Ultraiso.
Pick up the 7 .iso, delete the ei.cfg file, then "save as", give it whatever name you like before the .iso extension, e.g. AllEdition.iso
Otherwise, put the 7 dvd in the drive, rt click , select Copy , rt click the desktop, select paste.
After the files are copied, delete ei.cfg.
Then make those files into an .iso and burn to dvd.
This shows how to make the .iso easily using a free app. Bootable ISO - Easily Create from Installation Files
Hope it helps.
As everyone else mentioned - are you sure the key is valid?