Quick post here, since I only have minimal software installed at this point.
I have deleted my partitions, installed Windows 7 from a family pack upgrade disc without a key code, and then reinstalled over the top as an upgrade with the key code. then I activated it successfully. The I tested the activation by installing Microsoft Security Essentials.
This answers the big question of installing!
10-25-09 : update
I also did a custom install on a machine running Windows 7 RC. took the upgrade license key without any trouble. later i will delete the windows.old folder.