If you put a bootable CD in your optical drive, and reboot, does your computer boot to the program on the CD, or does it still boot to Windows?
If the BIOS isn't set up to boot from the CD drive when a bootable CD is present, and you don't have a password to change the BIOS, you won't be able to load W7 from it's install disk.
To use corkyg's method: (I'm assuming you have very limited room on your current drive, so you will need to do a little shuffling.)
Download and install: Macrium Reflect
Download and install: Partition Wizard Home Edition
Download and install Ausilogics Disk Defrag (these programs are all free)
Install your new drive in an enclosure, and connect it to your computer with USB
Using Partition Wizard, create a partition on the very inside edge of your new drive, which is the far right of the graphic interface. This partition should be about 40 or 50GB, and label it: Image Drive, or some such. This is where you will store your images.
Make another partition that spans a good portion of the rest of your new drive- but leave at least 40GB on the front of the drive for your OS/ programs. Label this partition: Documents or something.
Copy all your important documents, movies, downloads, photos, whatever to your new Documents partition. Copy- don't move. You want to be sure everything is present on your new drive before you start cutting stuff from the old drive.
When you are sure all your personal files are safely on your new drive, delete them from your C drive on your old disk. Obviously, it would be safer to copy a set of your files to a third drive, but having all your important files on your new drive won't be any worse than only having them on your old drive.
When you have removed all your personal files from your C drive (read: Partition), it should be less than 30GB- probably much less. Defragment your C drive using Ausilogics Disk Defrag, than, using Partition Wizard, shrink your C partition to about 60GB or so.
At this point, your OS/programs should be on your old boot disk, and all your data should be on your new disk. You can still access your data, but it will be slow because of the USB interface, but other than that, your computer should act normal.
Inside the Image partition on your new drive, create a folder called Images. In that folder, create a folder called Images for Laptop, and finally make a folder inside that last one called: laptop image 1. Your image partition should hold at least 3 images, and you should put each in it's own folder to keep them straight. Macrium gives the image files a number for the name, so just use the folder names to ID the image files.
Make a partition on your old drive for your data, and one for images, just like you did for the new drive. Copy your most important data back to the old drive in this new data partition. If your drive is full now, you won't get everything to fit back to this new partition on your old drive, so just take the most important stuff you can't afford to loose.
Tell your Defrag tool to exclude your image folders. Images don't like to be bothered. You can read them as many times as you like, but don't move them, or re size the partition they are in.
Use Macrium to create an image of just your C drive to each of your new Image partitions (one on each drive) with the default settings.
This next part I'm not sure about. You may need to create a partition on the front of your new drive to restore your OS image to. However, it's possible that Macrium will recognize the unallocated space, and make the partition for you. In either case, the partition should be at least as big as the original partition, but it can be bigger, and it needs to be “active”. I have always just used Partition Wizard to make an Active partition for the OS to go on.
To restore image: click Restore> Browse to the image, and select it>Select the partition you want to restore (there will just be the one)>Chose the partition to overwrite (this will be your new drive, and there is an option to select unallocated space)>New partition type = Active> It doesn't matter about the drive letter> No, not necessary to check file system on re-boot> No, it's not necessary to verify image before restoring (if it doesn't work, no amount of verifying will make it work)> Replace with the Master Boot Record> Finnish.
Once the program completes, turn off the computer, remove the battery, disconnect the enclosure from power, and put your new drive into the computer. It should boot normally with your current OS, programs, and all settings intact.. If not, put your old drive back, and it will boot normally. Than you can start troubleshooting, or try different images.
Hmmm... this is much longer than I meant it to be.