As a general rule I don't use Ubuntus upgrade option - it's been broken for years. I keep a separate /home, and re-install completely. Works fine, and recognises the userid and uses that to keep all options safe. You could do likewise, even on a broken system from a liveCD to setup your /home if you can find the space.

If you got a grub rescue screen sounds like grub was upgraded to grub2 - may have been all along I guess. Grub2 (on Ubuntu at least) complains when installed to a partition boot sector record, but appears to work o.k. You could do that from the liveCD, then update the bcd to pick it up. I use EasyBCD and version 2 works fine with Win7 Ultimate 64-bit.
See this for grub2 recovery on Ubuntu.

Actually, GRUB 2 has been in Ubuntu since 9.10, and only 9.10 and 8.04 LTS can be upgraded to 10.04 LTS without a clean install. So, the only 9.x release that can be upgraded is 9.10, and 9.10 already has GRUB 2.

All my 9.10 Ubuntu systems are using (classic) grub. Any upgrade to 9.10 retains grub1 by default, new installs (only) got grub2. So it's quite possible the OP had either before the attempt to upgrade to Karmic.
You presume too much.