Do not convert the disk to Dynamic as it is not desireable or needed. What I would do instead is convert the data partition from Primary to Logical so you can use another (Limit: 4) Primary partition for your new install.
Use free Partition Wizard bootable CD which is the best partition manager for Windows 7: Partition Wizard : Use the Bootable CD
Back up your files whenever you work with partitioning.
Boot PW CD, select 1 for screen res, rightclick on Data partition to Modify>Convert to Logical, OK. Apply step.
Now boot back into PW CD, rightclick on C to Resize, slide right grey border to the left to make enough room for your new partition, OK.
Now rightclick on the Unallocated space you made for new partition to Create New Primary NTFS partition, type in a label, OK, Apply all Steps.