After a few days of messing around I had to give up on restoring the image. I bought a new gateway machine (an fx6802) since reloading my machine is a big deal and I didn't want to do it again in a year when I was ready to upgrade.
So I made the recovery disks from the gateway recover manager. Installed a new blank hard drive and attempted the recover process. It seemed to complete but when it rebooted after loading the 3 recovery disks, it would continually reboot while trying to start windows. I emailed gateway tech support and after they asked me a bunch of useless questions like "is my virus software up to date" (huh?), they were about to send me recovery disk to try but now they are suggesting:
Note: A patch CD must be loaded after loading the User Backup media.Fingers crossed...
Please download the ISO image of the patch CD through the following link:
http://support.acer.com/acerpanam/manuals/acer/0000/ documents/FixUBKBoot_v1.0.0.0. iso
Note: a computer with CD "burner" software is needed to convert the ISO image into a physical CD
Please follow the steps below to properly install the patch disk.
1. Restore the system by user backup discs
2. After all user backup discs have been installed, insert the patch disc into DVD drive.
3. Reboot and press F10 and select to boot from CD/DVD drive.
4. A message will appear that says "Warning: A partition overlaps your system....."
Please press F10 to continue.
The patch CD will auto-download the missing files.
5. Once the download is complete, the CD-ROM will be ejected and reboot the system
(Please remove this patch disc from Optical Drive)
Okay, so that didn't work. Now gateway has me testing my new drive with gwscan to make sure it's not a problem with disk...
ps - Windows 7 image backup and recovery sucks (at least for me)