How do I use a MSDN product key to perform a Windows Anytime Upgrade to Win7 Ultimate?
Alternately, do I need to download the Windows 7 Ultimate iso and perform an upgrade that way? I do NOT want to have to do a risky install.
You can't use an MSDN key for an anytime upgrade. You have to find regular installation media. If you have MSDN access, you should be able to download a legit ISO from Microsoft directly. You can still perform an upgrade installation, it will just be running from the DVD you burn. What "riskiness" are you referring to? If you use genuine media with a genuine key from MSDN, and do an upgrade install, there shouldn't be any significant risk.
With some MSDN keys (it's unclear why this occurs with some and not others), you may be informed that an upgrade installation can only be done with Windows Anytime Upgrade, not from the DVD. However, as mentioned, you cannot do an anytime upgrade with an MSDN key. The only solution I've found is to use a regular upgrade or retail key (if you have any from other installations) to initiate the upgrade process, but choose not to activate automatically. Once Windows is done upgrading, you can go to the System control panel and change the activation key to your MSDN one, and activate with that. This will work (I've done it personally), but you need to have some other license key for it to work.
MSDN products are licensed for development use only. There are a lot of (unenforced) restrictions on them not present in retail and oem versions. Since anytime upgrades are not reversible, what you're asking for would mean losing the general use freedom in your original license.