If you’re having trouble installing Windows 7 SP 1, here’s something to check.  I have my computer set to dual-boot with Ubuntu, and apparently that changes some of the flags on the Windows partitions.  That said, this fix may not work for you if you aren’t dual-booting, but I’d give it a try anyway.

What you do is right click on Computer, click on Manage, and when the Computer Management screen comes up, click on Disk Management.  After a few moments you’ll see a list of drives and partitions.  You should see a 200 MB partition for Windows.  Right click on it and click Mark Partition as Active.  At this point you should be able to run the service pack installer.