Backing up Element 7 files and catalog

Hi -
Currently I am running Photoshop Elements 7 (PE7) on a computer with Windows XP.  All of my photos are on an external hard drive.  I want to back up all of my photos, tags, etc. (all the work I have done) and be able to access everything from my new PC running Vista.  I have already installed PE7 on the new PC (I'll delete it from the old one once I have everything working) but have not accessed any photos using it yet.  On the old PC, I have run the PE7 Inital Backup and an Intermittent Backup.  I have read through many threads about this subject but most discuss older versions of PE. 
I'm a little confused about what all I need to have Backed up and how best to Restore it.  I've read I need the photos backed up (obviously) but I also need the "catalog" file if I want to retain the tags, notes, captions, etc.  I've only seen the catalog file referenced as "My Catalog.PSA".   It looks like PE7 uses the file "C:\Documents and Settings/All Users/Application Data/Adobe/Photoshop Elements/Catalogs/My Catalog/catalog.pse7db".
Is this correct?
Besides the pictures, is this the only other file I need to back up to retain all my work?
Does the File - Backup option back up this catalog file automatically as well as the photos?
Without knowing the above answers yet, here's what I think I need to do and makes the most sense to do - PLEASE correct me if I am wrong.
1.  Run the "Backup Catalog to CD, DVD or Hard Drive" option as an Inital Backup so I have a backup of everything before I do anything else.
2.  Since my photos are already on an external hard drive and the drive letter seems to be consistent when I move it between computers, I don't really want to (or need to) Restore them back onto that external drive and I don't want them on my new PC so I won't run the Restore option.
3.  Copy the "catalog.pse7db" file to my Vista PC,   Question:  Where do I place it since the file structure is different than on my old XP computer?
Lastly, under "File" there is the option to:  "Write keyword Tag and Properties Info to Photo".  It seems too easy to just write this info to the photos and then only have to back up the photos.  I would think the photo file sizes could increase significantly and there must be additional information that the catalog contains (such as file locations??) so I would still need to backup and move the catalog to the new PC in order for PE7 to find and process all my photos correctly.   Am I right about this?  When does it make sense to use this option?
Thanks for your help!  This is my first foray into using Photoshop Elements (and a forum) and I don't want to lose all my work.

To build on Paige's response:
If you have photo creations (e.g. slideshows) or files that you moved offline to CD/DVDs, you should move the entire catalog folder (the one containing catalog.pse7db).  That folder contains the project files for your creations and it also contains the previews of your offline photos.  You can find the location on your old computer by doing Help > System Info in the Organizer.   The folder also contains other files that aren't essential to move, since PSE will recreate them if necessary.
Regarding File > Write Keyword Tags, that command tries to write the tags, captions, notes, date/times, and star ratings into the metadata of your files.  The advantage of this is that metadata can be accessed by many other programs and services, e.g. when you upload to Flickr, it will pick up your tags.  It doesn't make an appreciable increase in the size of your photos.   However, the command is quite buggy and often doesn't get the data correctly written, even with JPEGs. 

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