Yes, it is legal

Digital River is a big software distributor, and Microsoft would jump on them in a hurry if the downloads were not legal and genuine.

MS will mail you the discs at little or no charge. I have Vista. In a support issue, I said I wished I could do a clean install because some of my problems are caused by HP bloatware. The tech said "I'll just have them mail you the discs. We do it all the time." They mailed them to me, no charge. I'm confident Win7 works the same way.