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#11
Boot into the Win7 DVD and choose Custom install, then Advanced drive tools: Delete all, create New partition(s) as needed, then Format.
This is a quick format and will just delete the MBR. All other data including viruses is still there to be overwritten.
The only way to wipe completely the infections you have is to zero out the drive using either DBaN or GWScan.
If you want to make sure the infection which got into your XP installer is not in the Win7 DVD then download Spybot SND and run it on the DVD in another computer. It should not spread sitting in the DVD tray.