I had the same problem which brought me to this thread. The PC in question for me is an HTPC with no important data so I opted for a fresh install. After installation including entering the validation code included with the discs, I loaded various drivers and software and to my surprise, all of my data was still on the drive! My version of Windows is the Win 7 Family Pack Upgrade.
It's probably harder for OEM PC owners because the restore discs are images rather than install discs.