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I am planning to upgrade from Windows vista business to windows 7 home. Can I perform a format on the system disk, boot from the installation DVD, and install the OS on it with it still having a valid license key? Is the OEM vista license key is valid for windows 7 and if so how to preserve it? Thanks in advance!

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You can't upgrade to a different SKU i.e business to home, and you can't use a Vista licence on Windows 7. What I would recommend is buying a Windows 10 licence, then backup your documents etc, do a clean install of Windows 10 and copy you Documents back to the new installation.

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