Yes, as long as you have a working Windows installation with the same architecture (i.e. 32 or 64 bit) as the one you're trying to install, just extract your iso to any folder or use a virtual drive to mount it and run the setup.exe.
When you're asked whether to upgrade or do a custom install, choose the latter which allows you to do a fresh install on any partition. Windows installers since Vista copies all necessary files to the destination before it reboots the system, so it doesn't really matter how you access the original setup files.
I installed my Windows 7 this way so I know it works. music2myear's method is useful if your Windows XP is not working though.
May I have 2 windows on the same machine , but different partitions? Or this is not a good practice? – Jevgeni Smirnov – 2011-12-14T14:56:35.487
Why not? Many people do it this way when a new version of Windows first came out. Microsoft has always support this kind of practice when it became technically possible. – billc.cn – 2011-12-14T15:31:25.503
@JakeTheFish: "two windows on same machine" is called "dual booting". Searching on this phrase will yield lots of information and many how-to guides. – horatio – 2011-12-14T17:03:33.613
Yeah. I'v unziped ISO image and installed WIN7 from setup.exe. Right now there are 2 windows systems. – Jevgeni Smirnov – 2011-12-15T06:14:19.643