How to Clean Install Windows 7 with a Upgrade DVD Disc or ISO Image

To install a clean copy of Win7 using upgrade media...

1.Boot up the PC with the Windows 7 Upgrade DVD disc media into DVD-ROM drive.
2.Follow the Windows 7 Install Wizard to install the operating system on the blank, empty and clean system.
3.During installation, when prompted for a product key, DO NOT enter the upgrade version product key.
4.Unselect and untick the Automatically activate Windows when I’m online check box during the installation process. Hit NEXT...
5.After Windows 7 is installed, boot up to desktop, and manually enter the Windows 7 upgrade product key to activate online or activate via phone.

If online activation does not work... try one of these workarounds...

Workaround 1: SLMgr Commands to Insert Product Key and Activate
1.Open an elevated command prompt as administrator.
2.Use the following command to install product key:
slmgr -ipk
3.Activate Windows 7 with the following command:
slmgr -ato
4.To check activation status from command line, use slmgr -dlv or
slmgr -dli.

Workaround 2: Double Installs
1.After starting up the just installed Windows 7 system, allow system to boot to desktop.
2.Insert the same Windows 7 DVD media into CD/DVD optical drive tray to start Install Windows wizard again. Alternatively, mount the Windows 7 ISO image to a virtual CD/DVD-ROM drive, or directly run setup.exe from the unpacked Windows 7 installation files.
3.Reinstall Windows 7 once again (both Upgrade or Custom Install should be OK), enter product key during installation so that Windows 7 can be automatically activated when user first online after installation is done.
Steps above is originally used as a workaround to clean install Windows Vista with upgrade media, and is less commonly used as it’s time-consuming.

Workaround 3: MediaBootInstall Registry Hack

1.After booting up, ensure that no Windows Updates pending task which requires a system reboot to finish installing.
2.Run Registry Editor (RegEdit).
3.Navigate to the following registry key:
HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\CurrentVersion\Setup\OOBE
4.In the right pane, change the value data for MediaBootInstall
from 1 to 0.
5.Open an elevated command prompt as administrator.
6.Run the command below to reset Windows 7 activation status:
slmgr -rearm
7.Reboot the computer.
8.Run the Activate Windows utility (accessible from bottom section of Control Panel -> System and Security -> System, or type Activate Windows into Start Search), type in the upgrade product key and activate Windows.

http://www.mydigitallife.info/2009/10/27/clean-install-windows-7-with-upgrade-media-and-product-key-on-formatted-or-empty-blank-hard-drive/