This is a guide to setting up a virtual hard drive in Windows 7 (or Windows Server 2008 R2), that lets you create a virtual hard drive that you can treat as a physical drive meaning that you can boot from that virtual drive.
This gives better performace than a running a virtual machine and also means there's no risk of your new installation trashing an existing one.
http://www.hanselman.com/blog/LessVi...BootToVHD.aspx