|I'm not sure that is entirely correct. The MBR is pointing to a partition as the active partition that contains the boot record. If you format that drive the system will no longer boot because there will be no boot sector. At the very least a repair inatall will be needed.|
I haven't tested with Windows 7, but I have certainly had 2000 and XP installations where the system disk was not C:. Well written programs and batch files will not rely upon the system files being on C: but will get the location from an environment variable (%SYSTEMDRIVE%).