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#11
Always boot the installer to install Win7. Clean Install Windows 7 / Reinstalling Windows 7
If any Windows exists on the HD at the time the booted Win7 installer will detect it and pass a flag allowing use of Upgrade version key, even if you go on to use Custom>Drive options to repartiition.
If no OS is on the HD because you wiped it, repartitioned ahead, or have a new HD, Win7 Upgrade must be able to be reinstalled anyway without grossly inconveniencing the user. For this reason there are the workarounds given in Clean Install with a Upgrade Windows 7 Version, easiest of which is to do the quick registry edit immediately after install which always works if it's done correctly.
Never fear the loss of your Win7 software rights. You own the OS for life and can reinstall it any way you like as often as you like, as long as Upgrade version has a qualifying OS on hand to back it up - on the honor system. Save the Product Key as you would a bank account number.