You cant do a upgrade install from 32 Bit Vista to 64bit Windows 7 although you can upgrade to 32bit Windows 7. Also when doing a upgrade install it has to be for a like for like version eg you cant upgrade Vista Home basic to Windows 7 Ultimate
Just choose the 'Custom' option not the 'Upgrade. quote from MS "A custom installation doesn't preserve your programs, files, or settings. It's sometimes called a "clean" installation for that reason."