I have never been able to change an OS to another letter without bricking the OS. The only tutorials for doing so make it clear it is only if the OS letter has slipped.
What I would do is save externally a backup image of Windows 7 using an imaging software that will allow you to select where to reimage, such as
Paragon Backup & Recovery Free Edition - Free Download or
Macrium Reflect.
Then go ahead and do the Vista factory restore, shrink Vista partition in Disk Management, reimage Windows 7 to the shrunken space. Now boot the Windows 7 DVD Repair console to run Startup Repair up to 3 separate times to rewrite the MBR to Windows 7 and possibly configure the dual boot. If not, use
EasyBCD 2.0 beta in Windows 7 to add VIsta.
Others may have an easier idea. You'll have the backup image as a path back, so it's worth a try since Windows 7's drive letter is in most cases relative anyway.