You must have not marked the new System Reserved partition Active because otherwise the System flag would be on that partition and not C. But having it on C is OK. I'd delete System Reserved in Disk Mgmt.
The OS drive obviously is not in Disk0 position, so if possible I'd swap cables with the old PC hard drive to see if that will move the new OS drive to Disk0. Make sure it remains set as first drive to boot in BIOS setup.
Also if you have room to move the data off the old OS hard drive, I would wipe it with
Diskpart Clean Command and then repartition it in Disk Mgmt to get it cleanest, then move the data back on. Otherwise you should delete its old System Reserved partition, and convert the drive from Dynamic to Basic following
only Option One (non-destructive conversion) in
Convert a Dynamic Disk to a Basic Disk.
I'd also look over the steps, tools and methods in
Clean Reinstall Windows 7 which compiles everything that works best in tens of thousands of installs we've directly helped with here, and which has been followed by 1.5 million consumers without a single complaint. If you do this you will learn a lot about your PC and Win7, and have the best install possible in the world today.