Windows 7 Pro non destructive reinstall issues

Hi guys, have followed the tuit but the compatability report stalls with the report stating " Windows 7 cannot be upgraded to windows 7" or words to that effect.
When doing the little white lie trick by setting compatability as Vista service pack 2 the following compatability report states"To upgrade you must run Win 7 with service pack 1, close the installation and check for updates of service pack 1" .
My 32bit disc include service pack 1. Can any one direct me around the problem or is a clean install the answer ?

Thanks for the promt reply.
With Compatabilty set as Windows 7.
Run as Admin
Installation type- Upgrade.
Compatability report- To upgrade you need to be running Windows 7 with service pack1 installed. Close the installation and open windows update and check updates for service pack 1.
I am running Service pack 1 and have auto update turned on and no critical updates outstanding.
This is as far as I get each attempt.

I built the tower my self Intel i5 3470 3.2g
Has worked perfectly for 9 months. I believe (even though I have AVAST internet security) as I use torrents occasionally that windows has been corrupted.
Windows restore has no effect.

https://www.sevenforums.com/tutorials/3413-repair-install.html
Using the above Repair install , I get to item 12 " Compatability report " and can go no further.
Would a startup repair be worth a try ?

I guess by the lack of feedback it has everyone stumped !!

The reason I'm here is because I do not know. If not compatability mode "Windows 7 " what should it be ?

[IMG]file:///C:/Users/GEORGE/AppData/Roaming/Microsoft/windows/upgrade/images/alert.gif[/IMG] To upgrade, you need to be running Windows 7 with Service Pack 1 installed. Close the installation, open Windows Update, and then check updates for Service Pack 1.

My dvd / cd has Service pack 1, this is the original installation disc.