The $99 version is an upgrade, not a full version.
I contacted MS tech support this morning They claimed that it would work like a Vista upgrade, which is:
It can do a clean install. (I believe that you can't normally format the install partition, though. See below.)
The installation DVD *must* be started from a working version of an OS that's qualified for an upgrade. (It's a little different if you're switching for a 32 bit version to a 64, or vice-versa.) I believe that an upgrade version won't format the partition, because that would prevent you from having an OS present on it.
That said, if it's like Vista, there is (as far as I know) one installation DVD for all versions. (Actually, there were 2: a 32 bit and a 64 bit.) The installation type is determined by the license, not the DVD.
There's a widely publicized trick: if you install the OS *without entering a license key*, you get a 30 day evaluation version of the OS of your choice. Microsoft made it possible for an evaluation copy to qualify for a clean install of the OS using an upgrade license. So, it's possible to install Vista on a blank hard drive using only an upgrade license: the problem is that you have to install Vista *twice*. You'd be in violating the license if you didn't own a qualifying OS, though.
I don't know whether Win7 will allow the same thing. I expect that it will. Consider someone who bought a commercial (HP, Dell, etc.) PC where the OS re-installation support is by a partition on the system's hard drive. Suppose that person buys a Windows 7 upgrade license and installs it. Sometime later, the hard disk dies. Microsoft could declare that all responsibility for getting back to a working Windows 7 installation would be up to the PC's seller. Or, they could provide a work-around so the system could be brought back up using a blank HD. MS appears to have chosen that way in Vista; perhaps they'll do the same in Win7. I doubt that'll be known until upgrade licenses are in public hands, or at least the hands of testers.
Do you feel lucky?