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Bottom line. If your Vista was not genuine, you must buy the more expensive Retail Version (full Version). You must do a format install (clean) in case there was more than an OS on the copy your friend left you. If he were available he would not be able to help unless he had a genuine Product Key. I think he would have installed with that one if it were available. Im sorry for your problems but wish you the best.

Sorry if you misunderstood my answer. I was merely trying to explain that an upgrade version or the regular retail version will be available.
Question number 5 here should be of interest to you.
Buying Windows 7: top questions - Microsoft Windows
Your package should NOT say upgrade version, in your case it would not work.
When I mentioned that it may not be genuine, it was only because you received the warning from MS saying that it was not genuine.
When you do not insert the product key, you get 30-90 days of service at which point you receive warnings and the gradual removal of features.
Without the KEY MS will treat it as not genuine and that was my only meaning.

The cost for the full retail is higher of course than the upgrade, but without the product key you really do not have a choice.

Originally Posted by richc46

The cost for the full retail is higher of course than the upgrade, but without the product key you really do not have a choice.

Doesn't the upgrade media come with a product key? My Windows 7 upgrade disc came with one and I was able to do a clean install by following one of Shawn's tutorials The Windows 7 version of this:

Clean Install From Upgrade Vista

Good point Tom, I, however, went with the idea that If the computer were built 3 years ago, it did not qualify for upgrade, then, since it was the first OS installed. If my premise is correct, he cannot use upgrade now. If an upagrade key were purchased, now, it does not have a genuine system to upgrade from. You can do a clean install, from a genuine copy of Vista.

Originally Posted by richc46

Good point Tom, I, however, went with the idea that If the computer were built 3 years ago, it did not qualify for upgrade, then, since it was the first OS installed. If my premise is correct, he cannot use upgrade now. If an upagrade key were purchased, now, it does not have a genuine system to upgrade from. You can do a clean install, from a genuine copy of Vista.

Oh, my mistake then Rich So, even though this would technically work, it isn't legal to do so?

I can be wrong, but If the Vista is not validated, you cannot install an upgrade. Lets think, with a cracked copy of Vista I can upgrade with the cheaper Seven? In addition to not legal, it could not work, you must upgrade with a validated copy.
The validation is explained in part 2 of the tutorial.

Originally Posted by richc46

I can be wrong, but If the Vista is not validated, you cannot install an upgrade. Lets think, with a cracked copy of Vista I can upgrade with the cheaper Seven? In addition to not legal, it could not work, you must upgrade with a validated copy.
The validation is explained in part 2 of the tutorial.

I've completely confused myself now!

You can install Windows 7 from an upgrade disc onto a formatted HDD, and it will validate without a problem. If you don't have a full (retail or OEM) license beforehand, it is against the MS EULA to do this, and it is also considered illegal:

Regardless of what any hack says, a Windows 7 Upgrade is an Upgrade. What you need to know. - Microsoft SMS&P Partner Community Blog - By Eric Ligman - Site Home - MSDN Blogs

So you wouldn't even need a cracked copy of Vista to do so, you don't need any copy of Vista.

I'm really not sure about a Vista upgrade though. I don't see why the previous install needs to be validated, in the tutorial the PC is only validated once, and that's after the upgrade has taken place.