What went wrong: You attempted to install the Win 8 DP from within Win 7. This will indeed replace the current version with the new OS and create a folder called windows.old which does contain everything from the old installation.
Correct Installation Method:
1) Use a partitioning app and decrease the size of the Win 7 partition by at least 20 GB (I used 50 GB). This will leave unallocated space to install the Win 8 DP into.
2) Insert the Win 8 DP DVD you created and reboot. Choose Boot to Disk. Early in the installation you will be asked where you would like to install Win 8 DP. Choose the unallocated space you created in the previous step.
The installation process will create a dual boot situation with Win 7 and Win 8 DP.
To fix your present problem:
1) Click on the windows.old folder. The folder will open just like any other folder. Find all the data you wish to save. Move it onto removable media (DVD, flash drive, Ext HD, or another partition on your HD). Once you have all the data safely backed up on removable media or a separate partition you can proceed to the next step.
2) Either use the procedure outlined by the article Trouble linked to or:
3) Insert the Win 7 installation DVD and reinstall Win 7 from scratch. (At this step you could actually use a DVD you create after
downloading the Win 7 iso file including SP1 from Digital River. This would save you a step of installing this large update. Your original key should work although I have heard of a couple of times where a call to MS solved an activation problem.)
4) Install your AV/AM app of choice and any software firewall.
5) Install all updates offered.
6) Install all the apps you wish to keep.
7) Restore the data from your backup you created.
8) Use a good Imaging software and create an Image of your restored Win 7 installation.
9) Once your Win 7 is restored, follow the Correct Installation Method outlined above to dual boot Win 7 and Win 8 DP.
10) Use the Imaging software and create an Image of the dual boot scenario.
11) Enjoy playing with Win 8DP while preserving your Win 7 installation.
I hope this helps to solve your dilemma. It is really not as bad as it looks. Please check out Imaging to give yourself Peace Of Mind when making these types of changes.