Before I try installing Windows 7, I decided to make a backup of my macbook using Time Macine. I tried using iTimeMachine to backup over the network. This small app will simply enable TM to be able to use some network shared folder on my Windows macine. After using this small utility I found out that you could easily do a command in the Terminal as will be shown in the link below.
I came across 2 problems when trying to use my Windows machine as a sort of Time Capsule. The first was that I needed to create a sparce bundle myself using Disk Utility and copying it over to the remote folder. That wasn't difficult to do as such as higlighted in the above link
However the second problem wasted me a lot of time. When TM was starting to do the intial backup it would stop complaining about a problem with the network username or password. This didn't make sense at all as I could browse the folder with Finder using the same exact password. Apparently the solution was to reboot my mac and remove all keys to my windows machine (not just the Time Machine System key). Not sure about the reboot whether that helped or not. Right now I'm waiting for TM to finish so I can start installing Windows 7 RC.