Unfortunately, you already have the maximum of 4 primary partitions allowed on a disk thanks to how your OEM (HP) setup the HDD disk at the factory for your Windows 7 recovery partitions (System, Recovery, and HP_Tools). This is why you are not being allowed to create a new partition. You could extend the C: drive back into the "unallocated space" to add it back to C: .
If you are able to, I would recommend installing a 2nd HDD to breakup into separate partitions instead. They are cheap these days, and it would be a lot less trouble for you. You wouldn't have to worry about messing up your Windows 7 factory recovery partions on your current HDD and not being able restore Windows 7 with them if needed in the future.