I went through this whole thing, and there is a solution to it.
And it's really hilarious, because this kludge would allow *anyone* to buy an "upgrade" copy of Win7 and install it clean on a new machine, even without owning a previous copy.
In my case, I own a legit copy of WinXP that was installed on a 1tb drive. I wanted to keep that runnable, and install Windows 7 on the new SSD that I bought (OCZ Vertex 120gb). I purchased an "upgrade" package of Windows 7, which is just fine because I do own a legit WinXP. But yeah, Microsoft made this type of install a royal PITA for people.
Here's what you do:
Install Win7 doing the "custom" install so that you install it clean on the new hard drive. When it asks you for your 25-digit product key, leave it blank, and the installer will continue the installation anyway, and then give you 30 days to activate it or face the consequences.
Once you have finished the install, and you boot up into Windows 7, run the installer again off the dvd. This time, choose an "upgrade" install. Let it do the "upgrade" install right over the top of the clean install you just did. When it asks for your 25-digit product key, this time input the product key that came with your Windows 7 Upgrade package, and it will work.
I know this works because I did it myself. This isn't just something I read. I went from Windows XP on my 1tb hard drive to a clean, 64-bit Windows 7 install on my (brand new and unused) OCZ Vertex 120gb SSD, and it's fully activated and running fine.