My first advice before starting, is, if you have enough backup space,
to take a backup of the whole disk on some external disk.
Use a product such as
AOMEI Backupper Standard Freeware, create its emergency boot disk or CD, and verify that
while booting it you can see both the hard disk and the backup media.
AOMEI Backupper will only backup the used sectors on the disk, so your backup
image will be much smaller than your disk.
Question 1
Deleting the two partitions will create one contiguous unallocated space.
When installing Windows 7, you can designate this space as the one used
for the installation.
I do not remember if in Windows 7 you will need to go to Advanced
options during the installation to be able to choose the installation space.
Question 2
After/before installation, you can use Disk Manager to resize disks
D and E. Reducing them will create unallocated space following these disks.
You will need to move the resized partitions down in the disk so that
the unallocated space is merged and follows C, then resize C to include that space.
Question 3
All unallocated space is unused, or in other words wasted.
You may either format it as a new partition, or distribute it among the existing partitions.
As above, you will need to position the partitions so they are followed by
unallocated space before resizing them to include that space.
Use the Windows Disk Manager as much as possible, because it will not allow
you to destroy the partition, while third-party partition editors could let
it happen if you make a mistake.
