Upgrading to Windows 7 is normally a painless process, but if you want a bit more granular control over the process you might like Paragon System Upgrade Utilities 2010.
Paragon System Upgrade Utilities 2010 leverages the company's imaging, partitioning, and boot manager software in a way that allows you to backup your old system, create a separate partition for the OS if you so desire, and run both your old OS and the new Windows 7 from the same drive.
Alas, the handholding that Paragon System Upgrade Utilities 2010 offers isn't nearly as thorough as we'd hoped. The Initial Backup imaging was a no-brainer, but the Install OS partitioning section didn't seem to realise that even a minimal Windows 7 installation requires several gigabytes. It let me create a new partition with only 1.8GB.
Of course Windows 7 balked at installing there. This happened when we were using a minimal 8GB virtual machine partition; Paragon System Upgrade Utilities 2010 came up with more reasonable sizes when used with larger disks, but it does illustrate just how much help you can expect.
All the components of the Paragon System Upgrade Utilities 2010 worked perfectly for me. Two of the more useful features are the ability to convert a Paragon image to the .vhd format (which you can mount or run under Windows 7 natively), and the boot manager (which allows you to boot to both your old operating system and Windows 7).
Microsoft does provide a free downloadable utility - Disk2vhd - that can copy a partition to .vhd. If you install Window 7 to partition other than the one your current OS resides on, Disk2vhd creates a dual-boot menu for you automatically. Paragon's versions, however, are a bit slicker.
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