Are you able to open up the image and manually pull out individual files? It sounds like you'll have to do that.
If you were to completely restore the image, you'd end up with Windows Vista.
The programs will likely no longer function correctly, because you'll lose the registry entries. You can get all your documents and other stuff back if you are able to manually copy individual files.
you sure about that? i copied the program files for Movie Maker from my XP machine and put it on my Windows 7 system and it worked perfectly.
Also, most programs will lose any settings if you just copy the program files folder. They can also put files in other locations (although they are usually setting files, in places like Application Data).