You should ask Microsoft about this. On Xp licenses, you simple had to call and argue with the idiots until the transferred you up to a high enough tech to do the job.

Ask the tech how to remove Windows 7 from the machine, and how exactly to deactivate the key.

What you are really wanting to do is transfer the key to a new machine. Make sure that you are not being tricked into deactivating a key, only to find out later that you can not activate it on another machine.

My experience, in activating several dozen computers with various Xp licenses, is that the Microsoft agents will go OUT OF THEIR WAY to try to trick you into saying that the program is on more than one machine at once. This voids the key, and they will have you read the key to them, only to have them lock it out as pirated.

Stand by your guns, and every time they ask if you have installed this software on another machine, tell them the software has been removed from the original machine which has died, and transferred to the new machine.

You need to format the drive and then install and activate the previous operating system.