Upgrad Vista to Win7 & OS in seperate 32.2 GB partion

With a new system, you will need to reinstall all your programs. There is no way around it because programs are not only "program files" but a lot more such as registry settings, etc.
But your data folders, if they are in a seperate partion, you can just "include" into the win7 libraries. That is the easiest course of action.
32GB for an OS is tight but will work if you take some precautions (control the shadowstorage, eliminate the hibernation file, etc.). My win7 32bit is 15.4GB right now and I have quite a few programs installed. My 64bit win7 is about 5GBs bigger.

Re:"With a new system, you will need to reinstall all your programs. There is no way around it because programs are not only "program files" but a lot more such as registry settings, etc."
What do you mean by a new system?
If I were to back & save my registry in my Data partion Backups folder could I later merge it with the new Win 7 registry in order to have my programs work OK?

Sorry, but this will not at all work. Besides, you never said what your "old" system was. And we are not only registry, that was just an e.g.. You would make quite a mess importing a registry from another system though.