This is the way I would do an Upgrade to Windows 7. They call it an upgrade but it really isn't. This way you can avoid any problems in going from Windows XP to Windows 7. I don't run dual boot systems, I have Ubuntu on another computer so when I want to play I just use a KVM switch to change OS.
I have heard and read that some folks have had problems upgrading from Vista to Windows 7. I don't believe in upgrading an OS, one reason is you bring any problems along with the upgrade. If your computer isn't running right, an upgrade might not fix it. Another reason I don't upgrade is if you want to go from a 32 bit OS to 64 bit (I have been running Vista and Windows 7 in 64 bit for a couple of years.) you could run into problems.
I think a clean install is the only way to go. Saving your old hard drive is not a bad idea, in case you want to go back. Once I went to Windows 7 RC1 I turned off my Vista computer and are saving it in case a customer needs help and I need Vista, Otherwise it stays off. I don't even have a Keyboard, monitor or mouse connected to it. I remote in when I need it. When I received my copy of Windows 7 RTM from Microsoft I again did a clean install. I have all of my data backed up on my server here at home. An off site back up is a very good idea, I don't do it because I'm lazy.
I think when you go to Windows 7 you will be very happy. I did notice Saturday 10/24/09 Microsoft's Update servers were busy, I would think that was because that was the first Saturday after the release of Windows 7 and a lot of new computers were sold and connected for the first time. I didn't have any problems connecting to Microsoft's update server on Monday.
Happy Computing and enjoy Windows 7.