You will probably need to put it on a disc. The flash device will not work for a repair install. Then yes, you backup everything and run the Software audit program. You should also make sure you can read your Windows 7 license sticker. The audit tool will not get the correct license key for your system; the key it finds cannot be used in a re-install of Windows 7.

Once you have the files backed up and your keys written down/saved, then you can put in your Windows 7 disc you burned and repair install Windows 7 while logged into Windows.