I can't answer your questions precisely because I have not done it your way.
I have done it with a Linux host and Windows client which more sense for a
number of reasons. The main one is that Linux can go months without needing
to reboot. Also there is much less chance of losing your VM due to a crash
or infection.
However your way should work.
A VM is just a large container file that mimics a drive creating a computer
within a computer. This is where I cannot help. I don't know W7 well enough
to tell you where it is located. It will likely be with your documents and
settings. Look for a large file. It may be in a hidden directory.
You can of course create a new VM with Ubuntu. Stick with 32-bit. You will
need space for about 8 gb, larger if you plan on installing much or work
worth large files such as multimedia.