I successfully transferred Windows 7 to a new drive using the "System Image" backup option. I used it to back up the old hard drive to an external USB drive and burn a bootable "recovery DVD". Then I shut down the system and swapped the hard drives. After that, I booted from the recovery DVD and restored the backup to the new hard drive.
When you run Windows 7 Backup (Start -> All Programs -> Maintenance -> Backup and Restore) you'll see a couple of links in the left pane:
"Create a system image" - this makes a backup of your entire system disk including the partition layout etc. to any backup media you choose.
"Create a system repair disk" - this lets you burn a DVD that you can boot from in order to restore. This is so that you have a way to restore the backup in case the OS disk dies and there's no way to run Windows 7 backup. Of course if you're replacing the OS disk completely, you won't be able to use it to do the restore so you can use this option to burn the repair disk, then swap the hard drives, boot from the repair disk, and restore the backup to the new drive.