Backup currently installed Windows 7 OS with 3rd party software?

DriveImage XML has allways worked for me... I haven't tried it on Windows 7 but I doubt it would have a problem. Your Hard Drive's manufacture website may have their own OS backup software.
http://www.runtime.org/driveimage-xml.htm

The question is why remove Windows 7 if you probably have enough disk space to have both Windows 7 and 8?. You could just create a new partition of you don't already have one, and install Windows 8 there, the Windows 8 installer will probably configure the boot loader to include Windows 7 so you don't need to format the Windows 7 installation.. in any case you may want to backup Windows 7 which is always a good preventive measure but if you have trouble backing it up, that's not an obstacle to create a new partition.

Good partition software are: Minitool Partition Wizard Home Edition, AESEUS Partition Master, AOMEI Partition Assistant Home Edition

Windows 7 can create a backup hard disk image of all the partitions that are required for a successful startup of Windows:

Control Panel >> Backup & Restore >>

Click "Create system image"

When the image has been created, you then need to click "Create a system repair disc" and insert a blank CD-R into your CD/DVD burner.

Whenever you need to restore your Windows 7 installation back to the hard drive, boot from that CD and a graphical menu will appear. Choose "System Image Recovery" and your hard disk image on the external drive should be found automatically and written back to the hard drive.

Do not move the system image from it's original location (the root of your external drive) or Windows Restore won't be able to find it automatically, and I can't remember if it has a "Browse" button for you to navigate to it.

Finally, I assume you have checked that Windows 8 drivers are available from the PC manufacturer or motherboard manufacture, whichever is appropriate?

Easus Todo is another free imager that lots of folks recommend.

I have the upgrade edition of Windows 8, so it will overwrite Windows 7 when I install it.
I'll check the external drive's manufacturer's site for OS backup software.
I would like to add the OS backup to an external HDD that I've already backed the files to. The imaging software that I've looked at seems to format the entire drive, or partition...thereby destroying the existing contents. Once it has reformatted the drive, or partition, it will write the image to it. That will cause the files backup to be deleted.

Thanks for your useful advice.

Phil22,
As I stated in my question: Windows Backup and Restore isn't working for me, probably because Symantec's Norton 360 has taken that function over.

Thanks for your reply.

J_E_D_70 ,

Thanks, I'll try that as well.

^ That's why it's a good practice to divvy up your drive into a C: and D: partition. OS and programs go on C:, media and files on the D: That way you can blow away the boot partition at will without having to copy all our data back on. You will, however, still have to resinstall programs you installed after the image was created.

And repoint My Docs, My Whatever to D:.

The Upgrade Edition of Windows 8 does not necesarily have to overwrite Windows 7... there are a good deal of tutorials on how to install Windows 8 Upgrade Edition on an empty partition. If the linked tutorial isn't so clear, do another search with the same title and pick the tutorial that best suits you.

Clean Install with Windows 8 Upgrade
http://www.eightforums.com/tutorials/13375-clean-instal...

May be you haven't used the imaging software appropriately, when installing a backup it would be expected that the software would format the drive/partition, but not when you are creating the backup. In any case ImageDrive XML does not format the partition when creating the image, I have used it a number of times and it does not... guaranteed.