1. Would I be able to write my XP-only and unused partition image over my dual boot Win 7 install? Would that XP-only image overwrite the later dual boot loader with my present XP-only one (which is what I want, really)?
Yes, when you restore an image, the whole disk image is written to the whole disk.
2. Does making a disk image preserve boot loaders?
Yes, a disk image copies the whole disk byte for byte.
3. Which software would be better for this: Macrium Reflect Free, or Acronis True Image WD Edition as supplied by WD for my boot drive?
Don't know. I've had good luck with Clonezilla (use the default settings) doing partition image backups/restores (I assume it will work just as well for full disk images).
I'm not interested in incremental backups, nor am I interested in only backing up each individual partition. I want to keep this as simple as I can and back up the entire drive for disaster recovery.
I'd suggest doing partition backups, since you'd save 100GBs. Also, doing partition backups is not much more difficult than full image ones (choose slightly different options and do one extra backup).