Attempting Windows 7 install in multiboot system

I downloaded the Windows 7 Build 7000 Beta today with the product key and I'm trying to install it on a Dell E520 desktop.
Just to complicate matters, this machine already has Windows XP (installed on a primary partition) and Ubuntu Linux (installed on an extended partition).
I created a 75 GB primary partition for Windows 7 formatted to ntfs.
When the Windows 7 installer asks me where to install Windows 7, I point it to the empty Disk0 Partition 2 (WinXP is on Disk0 Partition 1).
However, when I press Next expecting this long-awaited install to go ahead, I get this message:

Setup was unable to create a new system partition or locate an existing system partition

...........and that's as far as I can get with this.
I should mention that I'm using Grub (Linux) as my bootloader in this dual-boot system and Grub rather than the Windows bootloader is in the MBR. Grub boots Windows XP by chainloading the WinXP bootloader.
Any clues how I can overcome this?

You could try making the Win7 partition unallocated space before doing the install, that is what I did when I installed my dual boot with Vista. Granted I am not messing with Linux or anything.

My guess is, though, you are having a conflict with Win7 finding the MBR. This is a fairly uneducated guess however.

Just a thought.

Thanks for the reply.
During the attempted install, after I first got the error message, I did actually delete the 75 GB partition I had assigned to Windows 7 which made an unallocated space. I then created a new partition and formatted it to ntfs using the Windows 7 installer.
However, I still get the same error message which stops everything in its tracks.
You also say

My guess is, though, you are having a conflict with Win7 finding the MBR

I believe this is extremely unlikely as the error message I get occurs about 3-4 seconds after initiating the install. However, were it actually true that because Windows 7 saw Grub in the MBR and therefore refused to create the new System Partition (which I understand I don't even need), I can very easily use fixmbr to put ntldr back to the MBR until Windows 7 is installed and then re-install Grub.
However, before trying this it would be great if you or anybody else can confirm that this is a real possibility.

I see. I would suspect that if you can install Vista on that partition in the same way you are trying to install Win7, then Win7 should work. However, if Vista cannot be installed the same way, then you probably have an issue with the Grub setup. An easy thing to try if you have a Vista disc sitting around.

After you reply, it doesn't seem like an MBR thing. Since it involves Linux, it is a little beyond me.

With all my dual and tri boot systems I have always have installed windows first then Ubuntu last. The reasoning behind this is sometimes the windows installer will completely skip over the Ubuntu partition, even thought it sees the partion it doesn't recognize it as bootable. Another reason is window likes to be the fist primary partion on the disk and somtimes won't install if it's not. Also its a good Idea to put ubuntu on a primary parition and then it's swap on an extended partion. I think your main problem is the installer is looking for a Primary partion at the begining of the disk, It can't find it therefore It gives you that error. I guarentee If you use partion magic or If you can boot back into xp and use disk management to make the windows 7 partion at the beginning it will install no problem. Just speaking from experience.

@crazy_cjenkins
Thanks for your thoughts.
Actually, I'm not worried about the Windows 7 bootloader seeing Ubuntu or not as, once I get Windows 7 installed, I'm going to go back to Grub as my "universal" bootloader and boot everything, including XP and Windows 7 with that.
Your idea to put Windows 7 at the very start of the disk sounds good. I'm going to repartition my driver overnight to arrange it like this. So, I'll see if this works tomorrow.
Nevertheless, in the Windows notes for installation of Windows 7, they talk about installing W7 as part of a multiboot system and even installing to a logical partition and I never saw any mention of W7 having to be installed to the very first partition on the disk.
Anyway, only one way to find out.

Ya Grub is all I use it's a lot better than widows and I haven't played too much with LILO. I'm not sure what the documentation says but I Know that is what has always fixed that issue for me. Good luck!

Well, installing W7 on the first partition (primary) didn't make any difference. Still got the same error message.
So, the only thing left was some kind of incompatibility with Grub. I tried "fixmbr" (after booting to the WinXP install disk and choosing Repair) but nothing changed.
Next I tried the following:

Code:

C:\WINDOWS 
CD .. 
FIXBOOT C: 
FIXMBR 
BOOTCFG /rebuild

However, even after this the Grub menu still showed up on boot and W7 still wouldn't install for the same reason.
The computer I was using is a spare computer with nothing of importance on it. So, I used Parted Magic to completely delete all partitions. But, even with this, W7 install still gave the same error.
Strangely, when I booted without a CD/DVD in the drive and nothing at all on the HDD, not even a partition, I still got some comments about Grub stage 1.5 and Grub stage 2.
So, it seemed that Grub stage 1 was still in the MBR.
OK, nothing for it now but to use

Code:

dd if=/dev/zero of=/dev/sda bs=512 count=1

to completely remove Grub from the mbr.
And finally, W7 installed
Seems that W7 has some aversion to Grub However, it's going to have to get used to it as I'm going to re-install both Ubuntu and Windows XP and use Grub (from Ubuntu) in the MBR.