Here's what will happen when you boot with the dvd. You click on Install,
enter the upgrade edition product key and are instructed to exit Setup and
boot the machine to run the upgrade setup from the legacy system desktop
because the product key you entered requires that. You run Setup from the
desktop but the Advanced Options button is not available when you run from
the desktop. No option to format anything. Oops.
You boot with the dvd, use the tools available to format the target drive as
you would for a clean installation, and then start Setup. Once again, when
you enter the upgrade edition product key you are instructed to exit,
reboot, run Windows, and start Setup from the desktop. But there is no
legacy system to boot to. You formatted. Oops.
Ok, that doesn't work, so you don't format. You start the legacy Windows as
instructed when you entered the upgrade edition product key and at the
desktop you insert the dvd. You click install and enter the pk. You are in
Setup, but there is no Advanced Options button to allow you to format
anything. Oops.
Ok, so does the Custom Install option do some sort of automatic reformat?
No. Oops.
You cannot do a classic clean installation of Vista this way using an
upgrade edition product key. As far as I can determine, you can work around
it by formatting, installing a clean copy of the legacy Windows, and then
running the Vista upgrade. By deleting windows.old afterwards you should
have the same thing as a clean installation of Vista.
(You cannot run a Vista 64-bit Setup.exe from a Windows MCE 2005 desktop
since MCE 2005 is a 32-bit OS.)