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You can buy an installation tool at most auto parts stores.
\Windows
Normally it's included in the installation pack that you can download on the website. If it is not you will have to reinstall the game.
You just put in the installation disk for Win 7 and it will reinstall itself over the existing OS.
Windows.Old folder
Yes, if you have copied all installion files on your hard disk. If you haven't you cannot reinstall Vista.
You "Boot" the System from an Installation Disk (Usually a CD or DVD), and foolow the directions VERY CAREFULLY. You may lose all the data on the current installation Hard Drive if you make the wrong choices.
If I read your question correctly, I assume you're wanting to replace a Windows 7 installation with a Vista Home Premium installation, if so, simply insert your installation disc in your computer, open the setup, and proceed to install from there.
It is possible the computer already has a virus that is preventing the installation of anti-virus software. You may have to reinstall the operating system from scratch to get rid of the virus. There is no other reason I can think of as to why the computer will not install the software.
Self-healing
Normally you put the original installation CD in the CDrom drive and re-install the program.
Just reinstall drivers for your audio device. And it will work again. After installation you might need to reboot your system.