The directory still existed on the hdd, but it couldn't be seen.
From there I located and deleted the Windows folder within DOS. I booted from the Win 7 DVD and went into Windows Recovery Mode. The issue seemed to be that despite booting from the Win 7 DVD, on some level the partition with Win 7 on it was being accessed and therefore wouldn't allow me to move forward. Literally had no options aside from installing Windows again and having the 'old windows' folder created. It wouldn't allow me to make any changes to the partition that Windows was installed on. To be clear, I was having the same issue when trying to format and reinstall Win 7 Ultimate on the custom machine I built a couple of years ago. I realize this post is a couple years old, though I figured it might help anyone trying to do research just as I was while encountering the same problem last night.
