Anybody tells me he wants to replace Win7 with Vista, I leave the room quietly.
The E drive is a backup, don't do anything with that whatsoever. If you replace Win7 with Vista you're going to have a totally brand new installation, generally speaking (unless you earlier upgraded from Vista to Win7 and saved things such that you can do a downgrade, but I am guessing not). So once your backup is taken, just book to the Vista installation DVD and let it do its thing, formatting C: from scratch (but leaving E in case you have to revert to the backup for some reason).
What do you mean he wants to format his other PC? Do you mean he wants to clear out the drive so he can toss it, or do you mean he wants to start fresh with a new Windows installation? If the former, it's easiest if you can take the drive out and install it in a second PC, then boot to the second PC's installation, then format from there. You can't format a drive that you're currently running Windows off of. You could also try booting to a windows installation CD/DVD, as that will generally let you into a repair console that has some DOS functionality, but I don't recall if format is an option from there. You could of course also tell it to format the drive as preparation for installing windows, and then just stop once it's done that.