I trust disk imaging software more than I trust Microsoft (or any other entity which could permanently disable "unregistered" software). The Acronis software linked above is pretty good, I use an old copy of Norton Ghost. The basic idea is to somehow boot your machine and archive an image (a "snapshot" of the entire drive) entirely outside of the main operating system.
You can't simultaneously use two or more copies of Windows with the same key, Microsoft will eventually flag one as not genuine. They marry each Windows key to enough unique hardware IDs that even swapping a drive (and its full working Windows install) from machine to machine will eventually cause small Genuine Windows issues.
You can always use a generic product key to install Windows, then later use a proper product key to activate/register your copy.
You can run a non-activated copy of Windows 7/8.x for up to 30 days without any issue (aside from sporadic reminders to activate). You can even continue to run Windows after it's decided it's a "non Genuine" copy, although you lose a lot of functionality and can't update and are generally crippled by minor annoyances until the product is allowed to connect to the Microsoft mothership and activate itself. This is not technically piracy but it is unethical and clearly violates the Microsoft EULA stuff - most people get annoyed enough with their crippled Windows that they'll buy an activation key online (for just 10 or 20 bucks). A non-genuine Windows install is a risky bet when it comes to security, troubleshooting, and backups, software problems will occur far more often and be more difficult (time-consuming) to repair. All the helpful little features and programs built into Windows will be turned against you, and it apparently gets worse over time.
If you use the "free" Windows 10 upgrade, your Win7/8.x product key becomes a Win10 product key in Microsoft's database. It still seems unclear whether you can later decide you don't like Win10 and use your key with the original Windows version it was for - Microsoft has nothing to say on the matter - I haven't tried it but enough people online have "lost" their keys after a Windows retrograde that I'd be worried.
If you do things the Microsoft way with Microsoft's downloadable Windows tools then you need a bootable USB device, it's kinda non-optional. Almost any 4GB or larger USB2 or better drive will work, such things are now available at your local Dollar Store.
If you need a free OS then try out a
linux!
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