I had this issue too. I have always (since Windows 2000 at least) moved the "My Documents", "My Pictures", etc. folders to an external drive and used my primary drive for only Windows and my programs/some settings.
I was always able to do this easily with all Windows OSes until Windows 7- this is due to the new "Libraries" feature.
What you will need to do is....
1) Download the zip file at the end of the article here:
How to Disable “Libraries” Feature in Windows 7? - Tweaking with Vishal
2) Use the registry settings file to disable "Libraries" and reboot.
3) right click My Documents, choose properties, then Location tab, click Move and move the folder to the external drive. Apply and ok.
4) after you have moved all the folders you wish to an external drive, you may re-enable "LIbraries" if you wish by using the included "Restore Defaults" registry file in the download from step 1. (reboot again)
Due to the libraries feature you can't map folders under your user profile, so you need to disable libraries 1st.
I was unable to map my entire user profile and ALL sub directories (My Docs, My Pics, etc) because right clicking it doesnt give one a properties box with the "Locations" tab.
I was unable to move the sub folders (My docs, my pictures, etc.) without disabling "libraries' because the properties box with libraries turned on, only brings up the dialogue box to add/remove folders to that library, etc.
I tried at first to just add my documents folder on my external drive to my Windows 7 Documents library, but it erroed saying the folder was read-only.
I changed the properties to not be read-only by uncheking that box, but it still errored stating it was read only.
The only way I was able to accomplish this was as outlined above.
It isn't that big of a deal really, and now I can enjoy my libraries feature with the peace-of-mind that all of my data is safely stored on another drive in the event of a virus, hardware failure, etc. (I do backup my external drive every now and then as well.)
I hope this helps!
Rich